Does gross domestic income, trade integration, FDI inflows, GDP, and capital reduces CO2 emissions? An empirical evidence from Nigeria

This research aims to inquire whether the gross domestic income, trade integration, foreign direct investment (FDI) inflows, gross domestic product (GDP), and capital reduces carbon emissions in Nigeria. An Autoregressive Distributed Lag (ARDL) bounds testing to cointegration and the improved Vector Autoregressive (VAR) approaches were employed for the analysis over the period 1980–2018. From the bounds testing to cointegration result, we found a long-term relationship between the carbon (CO2) emissions, income, trade integration, FDI inflows, GDP, and capital. However, we unravel that an increase in FDI inflows, GDP, and capital reduced carbon dioxide emissions in Nigeria. The outcomes of the Granger causality shows two-way impacts between CO2 emissions and FDI inflows, while one-way causality occurred from the capital to CO2 emissions. Following our empirical findings, we opined that the Government of Nigeria should continue to improve on providing incentives for economic agents, both local and foreign, under climate-friendly guidelines.