The Effect of Manufacturing Activities and Economic Openness on Co2 Emissions in Ghana : An Autoregressive Distributed Lagged Bounds Approach

This study investigates the effect of manufacturing activities and economic openness on CO2 emissions in Ghana for the period 1975 to 2014 using WDI data of the subsector. We conducted the Bayer and Hanck combined cointegration test to examine the short run and long run relationship. The ARDL bounds test was conducted to test the robustness of results. In this study, we accounted for the non-linearity of the production-emission relationship by modelling the environmental impact parameter which represented the contribution of foreign technology to environmental quality. We used the Lind and Mehlum second order test to confirm an inverted U-shape relationship. The results revealed that manufacturing trade positively affects the sector’s emission of CO2in the long and short run. The results also suggest a positive relationship between manufacturing production and CO2 emissions in Ghana and further analysis revealed an inverted U relationship which peaks early. Finally, there is no significant relationship between FDI inflows and the manufacturing sector and its CO2 emissions. Our findings highlighted the need for trade and industrial policies that prevent the dumping of manufacturing goods in Ghana while promoting local production of environmentally friendly manufacturing goods