1. Introduction
Following the dawn of industrialization in the mid-18th century, the global economy experienced remarkable growth and development [
1]. However, there is growing concern about the negative environmental impacts of this growth. Rapid growth requires high resource consumption that causes severe ecological damage, including pollution and climate change [
2]. In addition, ecological damage impedes the growth of the global economy, putting sustainable development at the top of the international agenda [
3].
Various tools and programs have been introduced over the past few decades to reconcile high economic growth and environmental protection. In 2015, the United Nations (UN) launched the 2030 Agenda for Sustainable Development and introduced 17 Sustainable Development Goals (SDGs) to end poverty in all forms and protect the planet. In the same year, 196 countries signed the Paris Agreement, a legally binding international treaty on climate change whose main objective is to achieve zero emissions by 2050 and thereby limit the global average temperature to 2 °C above preindustrial levels [
4].
However, the progress toward SDGs and the terms of the Paris Agreement is slow and uneven. Many countries still face severe poverty, income inequality, and environmental degradation. The main challenges preventing progress toward sustainable development are political hesitation, path dependency, and lack of cooperation among nations [
5].
Green growth emerges as a viable approach to achieve the coincident objectives of fostering economic growth and development while preserving the services of natural resources and the environment [
6]. Green growth strategies involve integrating environmental concerns into economic decision-making processes and restructuring industries to prioritize the environment. This includes investing in clean technologies, renewable energy, and resource efficiency. While innovation in green technologies is expected to drive efficiency gains, adopting cleaner technologies and renewable energy aims to mitigate environmental damage [
7,
8].
On the back of this background, this study aims to identify the determinants of green growth. We hypothesize that green innovation, renewable energy consumption, and institutional quality are essential factors that promote green growth. Green innovation involves developing products, services, and processes that improve energy efficiency and use natural resources efficiently without harming the environment. Hence, while low greenhouse gas emitting machinery, equipment, and processes help mitigate environmental damage, industries that adopt these innovations are transformed into sustainable growth paths [
9,
10].
Augmenting renewable energy sources is also crucial in promoting green growth. Investing in renewable energy sources such as solar, wind, and hydropower can help reduce dependence on fossil fuels while satisfying electricity demand and increasing energy security for countries worldwide [
11]. Additionally, it aligns with the principles of green innovation, as it promotes the efficient utilization of natural resources and promotes environmentally friendly technologies.
Institutional factors, such as political stability, the rule of law and democracy, and bureaucratic quality, lead to economic growth and improve environmental quality [
12,
13,
14]. On the other hand, poor institutional quality can hinder entrepreneurship and innovation, leading to the persistence of low-income areas [
15] and low environmental quality. Moreover, institutional quality also affects the environmental quality of surrounding nations through spatial diffusion channels [
16]. Thus, institutions may be pivotal in shaping societal rules, norms, and structures as crucial facilitators of green growth.
Accordingly, this study investigates the effects of green innovation, renewable energy consumption, and institutional quality on green growth in selected African countries. We focus on African economies for several reasons. First, Africa is currently the second fastest-growing continent in the world. Between 2000 and 2021, its average annual growth rate was 4.1% (compared to 3.06% of the world average growth rate) (see
Figure A1), and it is expected to increase to nearly 5–6% in 2030 [
17]. However, this rapid growth has come at a cost, leading to increased energy consumption, pollution, and environmental degradation [
18]. This, coupled with the ongoing struggles with poverty, reveals the importance of understanding green growth in Africa.
Second, while contributing a relatively low share of global carbon emissions, estimated at 0.7–1.3 billion metric tons annually between 2000 and 2021 (see
Figure A2), Africa bears a disproportionately heavy burden from the consequences of climate change. This disparity becomes evident when compared to major emitters like Asia Pacific (7.7–17.7 billion), North America (6.6–5.7 billion), and Europe (4.8–3.8 billion). This unequal distribution of emissions transforms into tangible hardships for Africa, with approximately 250 million people already experiencing water stress and an estimated 80% of African countries projected to lack sustainable water management by 2030 [
19]. This situation underscores the urgent need for approaches that concurrently address environmental challenges and support sustainable economic growth.
Third, Africa’s commitment to achieving the SDGs by 2030 and the objectives of the Paris Agreement by 2050 requires a shift to sustainable resource management that prioritizes conservation, biodiversity protection, and renewable energy consumption [
20]. Therefore, identifying the determinants of green growth and making policy recommendations in this direction will promote sustainable development on the continent and help African policymakers move forward toward their commitment to the SDGs and the objectives of the Paris Agreement.
While there is extensive literature on sustainability and green growth for developing and advanced economies, the literature on African countries is emerging. The closest study to ours is [
21], which studies the impact of technological innovation, renewable energy consumption, and institutional quality on CO
2 emissions in 25 African countries. Our study strays from the typical carbon emissions approach in the environmental literature and highlights the importance of economic development, social well-being, the efficient use of natural resources, and ecological sustainability through green growth. To this end, we generate the green growth variable for 49 African countries using the framework proposed by [
22].
The results indicate that institutional quality contributes to green growth in the short and long run. We reason that this is because solid institutions provide a stable and predictable environment and foster investment in sustainable technologies and practices. Strong institutions also enforce compliance with environmental regulations and sustainability programs. We also show that green innovation and renewable energy consumption have a negative and insignificant effect on green growth in the short term. In contrast, their long-term effect is positive and statistically significant. The short-term negative impact could be due to the entailed upfront investment and infrastructure demands. Yet, investment in green innovation and renewable technology production should be reinforced with a long-term perspective.
The control variables that we utilize also exhibit interesting results. Trade openness has a negative and insignificant effect on green growth in the short run but a positive and significant impact in the long run. This might be because of the initial specialization of highly polluting industries in African countries due to less stringent environmental measures. As exporters are exposed to stricter environmental standards imposed by major importers over time, they adopt cleaner production methods. The effect of FDI on green growth in the short run is negative and insignificant, while the negative impact is significant in the long run. This might again be due to the loose environmental regulations in African countries, which allow highly polluting foreign investments. Natural resource rent adversely impacts green growth and is statistically significant throughout the short and long run. The effect of GDP per capita on green growth is positive and statistically significant in the short and the long run. Finally, population growth exhibits a negative and statistically insignificant effect on green growth in the short run but a positive and statistically significant impact in the long run.
The rest of the paper is structured as follows:
Section 2 presents the literature review.
Section 3 addresses the methods and data.
Section 4 provides the empirical results and discussion.
Section 5 concludes the results with some policy options.
5. Conclusions and Policy Implications
By fostering economic prosperity while safeguarding the environment, green growth generates a holistic strategy for economic development. As such, green growth has developed as a critical paradigm for sustainable development. Therefore, understanding the factors that drive green growth is crucial. This study investigates the short- and long-term factors influencing green growth in Africa, focusing on institutional quality, green innovation, and renewable energy consumption. Additionally, this research considers the influence of GDP per capita, trade liberalization, FDI, population size, and natural resource rents. The robustness and reliability of the findings are ensured by addressing cross-dependence, slope heterogeneity, and long-run relationships between variables.
The finding shows that solid institutions are pivotal for fostering short- and long-term green growth. While green innovation exhibits a negative and statistically insignificant short-term effect, its long-term impact is positive and statistically significant, highlighting the need for long-term investment strategies. Similarly, long-term cost reductions that drive the use of renewable energy are positively related to green growth. However, its short-term impact could be adverse due to upfront investment and infrastructure demands. The impact of trade presents a complex picture. Short-term trade liberalization might contribute to environmental degradation, but long-term benefits emerge due to stricter environmental standards and knowledge transfer facilitated by trade. FDI exhibits a negative and significant long-term impact, aligning with the “pollution haven hypothesis”. Meanwhile, natural resource rents consistently hinder green growth across both timeframes. GDP per capita displays a positive and significant relationship with green growth in the short and long term. Despite exhibiting a negative and insignificant effect in the short term, population growth surprisingly shows a positive and significant impact in the long run, suggesting the potential for population pressure to stimulate innovation and sustainable practices, ultimately promoting green growth.
However, these general findings may have country-specific aspects. The variable “green growth” includes GDP, education spending, fossil fuel use, deforestation, and carbon impact, encompassing the most important aspects of green growth. While policymakers in lower-income countries like Ethiopia and Nigeria may prioritize increasing GDP, policymakers in higher-income countries such as Seychelles and Mauritius may be equally concerned about green growth’s social and environmental aspects. Therefore, future research could investigate non-linear models in GDP per capita and conduct cross-country comparative analysis to provide a more comprehensive understanding of green growth.
Based on our findings, the policy recommendations are summarized as follows. First, investment in robust and transparent institutions is crucial to creating a stable and predictable environment for long-term green growth strategies. This could involve strengthening regulatory frameworks, promoting good governance, and fostering public–private partnerships for sustainable development. Second, despite initial challenges, long-term investment in green innovation is crucial to bridging the innovation gap and promoting sustainable practices. Nevertheless, especially policymakers in lower-income countries should not rely on firms to invest in green innovation; instead, appropriate incentives such as tax breaks, grants, and public–private partnerships focused on green technologies should be fostered. Third, while acknowledging potential short-term challenges associated with upfront costs and infrastructure needs, prioritizing long-term investments in renewable energy infrastructure is essential. Targeted policies addressing cost concerns, such as subsidies or feed-in tariffs, can accelerate the transition. Fourth, promoting trade agreements that prioritize environmental sustainability is crucial to mitigate potential short-term environmental degradation from trade liberalization. These agreements should encourage knowledge transfer and stricter environmental standards among trading partners. Finally, a cautious approach to FDI is recommended. Governments should meticulously assess the environmental impact of potential FDI projects and ensure alignment with national green growth strategies to avoid attracting polluting industries.