Financing Africa’s green energy transition: do diasporas’ remittance inflows influence renewable energy consumption?

Abstract How do migrant remittances affect the use of energy from renewable resources? Remittances have become an important financial inflow for many African countries, as well as a means of assisting people in improving the security of their energy in the face of growing energy prices and overreliance on energy from fossil fuels. We examine whether the recent increase in African migrant remittances has an influence on renewable energy usage using panel data comprising 36 sub-Saharan African (SSA) countries from 1990 to 2019. In our research, we used a fixed effect model as a baseline estimator and a two-step system-generalized method of moments model to address potential endogeneity and reverse causality issues. Our results show that higher migrant remittances increase the consumption of energy from renewable sources in the SSA countries studied. In addition, our results for an alternative measure of renewable energy use (electricity net consumption) indicate that remittance significantly and positively affects electricity net consumption. Our findings are robust to alternate estimating approaches and endogeneity issues. We recommend enhanced remittance-investment policies that reduce transfer costs, encourage money transfers through formal channels, and strengthen financial systems.