Climate Change Mitigation Strategy, Household Welfare, and Financing Options in Africa

Climate change poses a significant threat to sustainable development, particularly in Africa, where most of the population depends on climate-sensitive industries for their livelihood. Mitigation strategies are crucial for curbing the adverse effects of climate change, and their effectiveness largely depends on the availability of suitable financing. This chapter investigates how the level of finance affects climate change mitigation strategies and household welfare using a sample of 20 African countries over twenty-eight-year period 1994–2021. We shed further light on the finance-climate change nexus by examining the complex interaction between three key variables: the level of finance, climate change mitigation, and household welfare. The two-stage least squares method was used for estimation, allowing for simultaneous estimation of the system of equations and accounting for potential endogeneity issues. The results suggest that the choice of financing option significantly influences the effectiveness of climate change mitigation strategies. Furthermore, these mitigation strategies have substantial implications for household welfare, potentially leading to improved living standards and social protections.