Carbon Transition And Inclusive Welfare Dynamics In Nigeria: Evidence From An ARDL Bounds Testing Approach

Abstract

This study investigates the dynamic relationship between carbon transition indicators and inclusive welfare in Nigeria over the period 1999–2024. The Human Development Index (HDI) is employed as a proxy for inclusive welfare, while carbon dioxide emissions (CO2), energy intensity (ENRGI), and renewable energy consumption (REC) serve as carbon transition indicators, with population (POP) included as a demographic control variable. Annual time-series data were analysed using descriptive statistics, the Phillips–Perron (PP) unit root test, and the Autoregressive Distributed Lag (ARDL) bounds testing procedure. Results show that the variables are integrated of mixed order: HDI, CO2, REC, and POP are stationary at first difference I(1), while ENRGI is stationary at level I(0), which justifies the use of the ARDL bounds approach rather than conventional cointegration techniques. The computed bounds Fstatistic (6.618) exceeds the upper critical bound at the 5% significance level, confirming a long-run cointegrating relationship among the variables. The long-run and short-run ARDL estimates indicate that energy intensity exerts a significant negative effect on inclusive welfare, while population exerts a significant positive effect; carbon emissions and renewable energy consumption are not statistically significant. The error correction term (−0.327) is negative and significant, implying that approximately 33% of any disequilibrium in inclusive welfare is corrected within one year. Diagnostic tests confirm the absence of serial correlation and heteroskedasticity in the residuals. The study concludes that Nigeria's carbon transition pathway remains structurally inefficient from a welfare standpoint and recommends targeted investment in energy efficiency, diversified renewable energy adoption, and population-responsive welfare policy to reconcile decarbonisation with inclusive human development.