Green Finance and Environmental Sustainability in the West African Monetary Zone (WAMZ)

Abstract

This study provides empirical evidence on how different forms of green finance affect environmental sustainability in the West African Monetary Zone (WAMZ), comprising Nigeria, Ghana, The Gambia, Sierra Leone, Liberia, and Guinea. The specific objectives are to determine the effects of international finance for clean energy, total donations for biodiversity conservation, international financial support for green infrastructure, and technical cooperation grants on carbon dioxide (CO2) emissions. This study relied on panel datasets gathered from the Global Carbon Budget, the Organisation for Economic Co-operation and Development (OECD), and the United Nations, and analysed using descriptive statistics, a panel unit root test, and a random-effects static regression. The findings showed that international funding for clean energy has a negative impact on annual CO2 emissions. Although this result is not significant at the 5% level, it suggests that funds from donor agencies for clean energy could reduce CO2 emissions across WAMZ member countries. Similarly, the results showed that total donations directed towards biodiversity conservation significantly reduced annual CO₂ emissions in the WAMZ during the study period. This suggests that donor-funded projects, such as reforestation, habitat restoration, protected area management, and anti-deforestation efforts, are delivering meaningful environmental benefits in the WAMZ. Additionally, the results showed that international financial support for infrastructure and technical cooperation grants positively and significantly affected annual CO2 emissions. This finding indicates that these funding sources have not translated into environmental sustainability, which may be linked to poor institutional quality, managerial inefficiency, and a limited focus on low-carbon technologies in the funds' investments. Given the findings, it is recommended, among others, that policymakers in the WAMZ should strengthen project appraisal frameworks and prioritise high-impact renewable energy initiatives to ensure clean energy financing is effectively utilised and results in significant CO2 emission reductions. It is also recommended that governments in the WAMZ enhance their institutional frameworks for conservation management to secure increased funding through international grants and climate funds dedicated to environmental sustainability in the region.