The threshold effect of electricity consumption and urbanization on CO2 emissions in Ghana

PurposeThe quest for economic development has brought adverse effects on the environment through the release of greenhouse gases, such as carbon dioxide (CO2). This will counter the efforts to achieve the Sustainable Development Goals (SDGs) by 2030. This study, therefore, investigates the effect of electricity consumption and urbanization on CO2 emissions in Ghana. Electricity consumption and urbanization are among the factors that can be used to reduce CO2 emissions.Design/methodology/approachFollowing the STIRPAT framework with the Hansen (2000) least squares threshold estimation strategy, the study employed annual time series data from 1971 to 2019.FindingsThe study revealed a single threshold effect of both electricity consumption and urbanization on CO2 emissions. Electricity consumption intensity reduces CO2 emission when electricity consumption is below the threshold (6287GWh) but increases when consumption passes the threshold. However, urbanization exerts a positive influence on CO2 emissions regardless the level of urbanization (either before or after the threshold point). Again, the empirical results revealed that the urbanization threshold moderates the effect of electricity consumption on CO2 emissions.Research limitations/implicationsPolicymakers have to consider redesigning the current urbanization mode to include some new-type urbanization elements.Originality/valueThe threshold effect of electricity consumption and urbanization on CO2 emissions in Ghana is examined using the Hansen (2000) least square method.