We investigate the causal impact of the development of financial institutions on environmental sustainability in Africa. Drawing on a distinctive panel data set encompassing 34 countries from 1980 to 2017, with carbon emissions serving as an indicator of environmental sustainability, we discover that enhanced development of financial institutions leads to increased carbon emissions, especially in relation to the depth of these institutions. Furthermore, our study reveals support for the environmental Kuznets curve, heterogenous slopes, and shifts over time in the finance–emissions nexus. Our results remain robust to different model specifications. The conclusions we reach indicate that the development of financial institutions and the implementation of pro-growth policies are essential for attaining environmental sustainability on the African continent.

We critically evaluate the absorptive capacity of renewable energy deployment in Africa. Using data for the 1980-2017 period and dividing the 20 countries into West Africa and East Africa, we find significant regional heterogeneities in the absorptive capacity of renewable energy deployment. Specially, we show that West Africa has a stronger capacity to embrace the adaptation of renewable energy than East Africa. Moreover, we find that renewable energy deployment exhibits path dependency in both regions. In general, our findings suggest that there are significant potentials for both regions to benefit from renewable energy deployment. However, without the financial backing by policymakers, renewable energy deployment is likely to be delayed in implementation, exposing these regions to economic and environmental vulnerabilities in the long run.