Exchange rate policies in Africa and climate change: A polluting “race to the bottom”?

This article demonstrates that real currency depreciations increase CO2 emissions in sub-Saharan Africa, and that this marginal effect is decreasing in capita income. The econometric results are consistent with the predictions of a simple theoretical model where the carbon intensity of the tradable sector is higher than that of the non-tradable sector, where the relative share of the tradable sector is increasing in real depreciation, and where the carbon intensity differential between the two sectors is a decreasing function of output per capita. The African specificity with regard to the polluting impact of depreciations is empirically robust, and seems to be linked to the small size of Africa’s manufacturing sector.