Investigating the multivariate Granger causality between energy consumption, economic growth and CO₂ emissions in Ghana

The economy of Ghana continues to witness a rising demand for energy coupled with growth in gross domestic product that follows a wavy trajectory. In the midst of this economic phenomenon, there is a trend of increasing greenhouse gas emissions with attendant economic, health, and environmental consequences. This paper examines the causal interdependence between energy consumption, economic growth, and CO₂ emissions in Ghana from 1960 to 2015 by using the Toda-Yamamoto and Granger causality tests. The Johansen and Johansen-Juselius cointegration approach and the Autoregressive Distributed Lag bounds-test approach are employed to test for cointegration relationship. The results show that the variables are cointegrated. The causality tests reveal that there is feedback Granger causality between energy consumption and CO₂ emissions. Since there is a causal link between energy consumption and economic growth with its concomitant effect on CO₂ emissions, any energy conservation-oriented policy not derived from energy efficiency and technological progress may hurt the Ghanaian economy. In effect, more effort should be aimed at improving energy efficiency through technological progress, and investment should be made in renewable energy to reduce over-reliance on fossil fuels.