FDI and the Environment in Developing Economies: Evidence from Nigeria

The impact of green FDI on environmental quality in less developed countries: A case study of load capacity factor based on PCSE and FGLS techniques

This paper examines the effect of green foreign direct investment (GFDI) on environmental quality (EQ) in 34 less-developed countries (LDCs) from 2003 to 2021. We analyze balanced panel data using Feasible Generalized Least Squares (FGLS) and Panel-Corrected Standard Errors (PCSE). Our findings reveal several vital insights: (1) GFDI helps improve EQ. (2) Environmental costs associated with economic growth are negative. (3) Trade openness positively influences EQ. (4) EQ is enhanced by institutional quality, energy use, and population expansion in the chosen countries. (5) The existence of a U-shaped curve was established. This is valuable to the relatively scanty literature on GFDI, especially in LDCs. To the best of our awareness, this study simultaneously employs the Load Capacity Factor (LCF) and Total Value of Announced Greenfield projects as proxies for environmental sustainability and GFDI for the first time. Secondly, incorporating PCSE and FGLS models in this context is an innovative methodological strategy. The present research work provides to the existing theoretical and empirical discussions on GFDI and EQ and has practical implications that inform policy-making.

Capital flow and environmental quality at crossroads: designing a sustainable policy framework for the newly industrialized countries

It is extremely difficult for emerging economies to achieve the Sustainable Development Goals (SDGs), and in order to close this policy gap, a comprehensive policy framework is needed. The purpose of this research is to determine the proportional impacts of domestic and foreign capital to environmental degradation in newly industrialized nations (NICs). For this reason, panel data methodology is used to evaluate, for the years 1991 to 2018, how the ecological footprint is affected by stock market capitalization, foreign direct investment, economic growth, urbanization, and energy intensity. Using the squared terms of stock market capitalization and foreign direct investment, respectively, it is also looked at whether domestic and foreign capital may have non-linear effects on the environment. According to the empirical findings, whereas local capital growth worsens the environment, increasing international capital prevents environmental degradation. There is an inverted U-shaped link between domestic capital and environmental degradation in the event of non-linearity, but foreign capital has a monotonically declining effect on environmental degradation. The study outcomes are utilized to design a policy framework to address the objectives of SDG 7, SDG 11, and SDG 13.

The effects of ICT and FDI on CO2 emissions in China

With the rapid development of information and communication technology (ICT) and counter-cyclical expansion of foreign direct investment (FDI), most foreign-invested companies in China are highly polluting. Meanwhile, new research shows that the impact of ICT on the environment is uncertain. This study is an effort in dividing ICT into hardware and software, aiming to explore its effects on carbon (CO₂) emissions from 2003 to 2017 in 31 provinces, autonomous regions, and municipalities in China and further explore the impacts of its application to foreign-invested enterprises on environmental quality. The findings show that ICT software has a significant negative effect on CO₂ emissions, but ICT hardware and FDI have significant positive effects on CO₂ emissions. However, when ICT software and hardware are applied to foreign-invested enterprises, they can significantly improve the environmental quality. Moreover, the durative innovation of ICT software ensures environmental sustainability. A set of government measures are published to help stimulate the positive effect of ICT software on CO₂ emissions, such as taxes and fees cuts, and no-interest loans. This could provide guidelines for other countries.

FDI and environmental degradation: the role of political institutions in South Asian countries

This study examines the impact of foreign direct investment (FDI) on environmental degradation by keeping in view the role of institutional quality (IQ) in the South Asian region. Second-generational unit root test is used to address the issue of cross-sectional dependency. Mixed order of integration enabled us to use panel autoregressive distributed lag (ARDL) method to investigate short-run and long-run association. Moreover, this study also employs Granger causality test to explore causalities among the selected variables. Empirical results reveal that FDI has a positive and statistically significant effect on environmental degradation. Institutional quality is measured as rule of law has insignificant impact on ecological footprint both in short run as well as long run. However, government stability decreases environmental degradation while corruption enhances environmental hazards tremendously. This study also supports environmental Kuznets curve (EKC) for the South Asian countries. This study emphasized the role of political institutions in environmental degradation. South Asian countries must focus on the implementation of environmental laws and regulations by improving the quality of institutions to achieve the goal of sustainable development.

Testing pollution haven and pollution halo hypotheses for Turkey: a new perspective

In this study, we analyzed the asymmetric short- and long-run causal links between foreign direct investments and emissions in Turkey over the time period 1974-2018. Using hidden co-integration techniques, we defined and tested the asymmetric pollution haven and asymmetric pollution halo hypotheses. To evaluate the long-run asymmetric causal relationship, we estimated both the crouching error correction model and vector error correction model. We performed a stepwise regression model to estimate the crouching error correction model. The empirical results confirmed an asymmetric causal relationship between positive shocks of foreign direct investments and positive movements in emissions in the short run as well as an asymmetric causal link between negative and positive shocks of foreign direct investments and positive emissions in the long run. Furthermore, the results showed that increases in foreign direct investments led to a decrease in the rate of emission growth in both the short and long run. This finding supports the validity of the asymmetric pollution halo hypothesis in Turkey's case. Policymakers should strengthen their environmental protection laws to protect the quality of their environments as well as implement policies that encourage the use of clean technology and tax incentives that increase foreign direct investment inflows. Graphical Abstract.

The impact of foreign direct investment on urban PM2.5 pollution in China

The hypothesis of "Pollution Heaven" or "Pollution Halo" has, for some time, been one of the central issues in environmental economics. There is a controversy in the conclusions with regards to China, it thus needs further empirical testing. Based on 2003 to 2016 statistical data on 285 Chinese cities, this paper uses a dynamic spatial panel model to empirically analyze the impact of foreign direct investment (FDI) on PM_2.5 pollution. The results demonstrate that urban PM_2.5 pollution shows both significant global spatial autocorrelation and local spatial agglomeration effects. Overall, FDI significantly aggravates China's urban PM_2.5 pollution, thus confirming the "Pollution Heaven" hypothesis. This effect, however, depends on the stage of urban economic development. Although FDI has no significant effect on urban PM_2.5 pollution in the initial stage of industrialization, it does aggravate urban PM_2.5 pollution in the midterm stage. In the later period of industrialization, FDI actually improves urban PM_2.5 pollution, but the effect of this improvement is relatively weak. Furthermore, PM_2.5 pollution shows significant spatial spillover and dynamic effects. It follows that both joint prevention and control and continuous efforts must be made to control PM_2.5 pollution.

Modeling the nexus between pollutant emission, energy consumption, foreign direct investment, and economic growth: new insights from China

Most nations are predominately preoccupied with the need to increase economic growth amidst pressure for increased energy consumption. However, higher energy consumption from fossil fuel has its environmental implication(s) especially in a high industrial economy like China. In this context, the current study explores the interaction between pollutant emission, foreign direct investment, energy consumption, tourism arrival, and economic growth for quarterly frequency data from 1995Q1 to 2016Q4 for econometrics analysis. Pesaran's autoregressive distributed lag-bound test traces long-run relationship between all outlined variables over the investigated period. Empirical results show positive relationship between pollutant emissions with all other variables with the exception of economic growth. This further exposes the environmental degradation in China with the curtailing strength from the GDP. The Granger causality analysis detects that CO₂ emissions and energy consumption show a two-way causality observed. Also, one-way causality existing between growth and foreign direct investment is seen running to pollutant emission. Furthermore, one-way causality is observed among foreign direct investment, energy consumption, pollutant emission, and tourism arrivals with economic growth, and this established their impact on the economic growth which will be a guide to the policy implication on how to ameliorate environmental degradation from the effect of consumption of fossil energy sources and foreign direct investment-induced pollutant emission.

Environmental implication of offshore economic activities in Indonesia: a dual analyses of cointegration and causality

Global warming issues have become a pertinent theme for many economies and policy initiatives. The Indonesian economy is no exception as government officials and stakeholder are working seriously to decouple carbon emission from economic growth. It is on this premise that the present study attempts to investigate the nexus between the environmental implication of offshore economic activities, economic growth, energy use, and environment (CO₂) with the integration of foreign direct investment (FDI) and trade openness over recent time series data from 1980 to 2017. A series of analysis were conducted with Pesaran's autoregressive distributed lag (ARDL) methodology and the Granger causality test as estimation techniques over the outlined variables. Empirical findings from ARDL long-run (elasticity) shows that economic growth is significantly positively associated with carbon emissions at the initial stage but a negative association is established at lags 1 and 2. A significant positive relationship is witnessed between economic growth and FDI. Also, statistical positive relationship is observed between economic growth and energy use, while an inverse relationship is observed between openness and economic growth. For causality analysis, we observe that a uni-directional causality is running from economic growth to foreign direct investment at 5% significant level. This outcome is in support of the growth-induced FDI hypothesis in Indonesia. Furthermore, a one-way causality is seen from energy to openness, CO₂ emissions, and from FDI to CO₂ emissions while there is a feedback causality between openness and CO₂ emissions. The findings of this study have implications to the environmental quality of Indonesia via economic growth; hence, the higher and better the economic growth of the country, the lesser the carbon emissions and the better the environmental quality. This proposition aligns with the pollution halo hypothesis (PHH), where FDI inflow enhances economic growth as well as impacts energy consumption and reduces carbon emissions in the host country.

Triangular nexus between foreign direct investment, international tourism, and energy consumption in the Chinese economy: accounting for environmental quality

Recently, China is named among the most carbon dioxide (CO₂)-emitting countries in the world after the United State of America (USA). A major part of Chinese carbon dioxide emissions is as a result of offshore industrial activities which come into the economy as foreign direct investment (FDI). Following this, the present study seeks to investigate the nexus between CO₂ emissions, FDI, energy use, and tourism arrivals, and possibly to advise on who will bear the responsibility of offshore CO₂ emissions. Utilizing ARDL-bound testing and Granger causality approaches for both short- and long-run effects the author found that economic growth (GDP) has a positive relationship with both tourism arrivals, energy use, FDI, and CO₂.This contributes to heavy CO₂ emissions which the author classified as the outsourced/offshore CO₂emissions in China's FDI. Tourism arrivals have a bi-directional (feedback) causal relationship with energy use and a uni-directional causal relationship with CO₂(transmitting from tourism to CO₂). Both FDI and energy use have a bi-directional (feedback) causal relationship; CO₂, energy use, and tourism arrivals have a unidirectional relationship with GDP which established the triangular nexus causality among the variables and the impact on GDP. Hence, the policy implication should be geared towards implementing the policies and regulations that will checkmate and reduce the excesses of foreign firms to the environment quality of China and promote environmentally friendly economic activities.

The environmental Kuznets curve in the presence of corruption in developing countries

Environmental degradation is at an alarming level in developing economies. The present paper examines the direct and indirect impacts of corruption on environmental deterioration using the panel data of 64 developing countries. Adopting the generalized method of moments (GMM) technique, the paper finds evidence that corruption exhibits a positive impact on pollution. Subsequently, there is also evidence indicating that the level of pollution tends to be higher in countries with a higher level of corruption, eliminating the effectiveness of income effect on environmental preservation. These results also suggest that environmental degradation is monotonically increasing with higher corruption and invalidate the presence of the EKC. Hence, a policy focuses that an anti-corruption particularly in the environmental and natural resources sector needs to be emphasized and enforced in order to reduce or possibly to totally eliminate the rent for corruption.

The impact of foreign direct investment on CO2 emissions in Turkey: new evidence from cointegration and bootstrap causality analysis

Pollution haven hypothesis (PHH), which is defined as foreign direct investment inducing a raising impact on the pollution level in the hosting country, is lately a subject of discussion in the field of economics. This study, within the scope of related discussion, aims to look into the potential impact of foreign direct investments on CO₂ emission in Turkey in 1974-2013 period using environmental Kuznets curve (EKC) model. For this purpose, Maki (Econ Model 29(5):2011-2015, 2012) structural break cointegration test, Stock and Watson (Econometrica 61:783-820, 1993) dynamic ordinary least square estimator (DOLS), and Hacker and Hatemi-J (J Econ Stud 39(2):144-160, 2012) bootstrap test for causality method are used. Research results indicate the existence of a long-term balance relationship between FDI, economic growth, energy usage, and CO₂ emission. As per this relationship, in Turkey, (1) the potential impact of FDI on CO₂ emission is positive. This result shows that PHH is valid in Turkey. (2) Moreover, this is not a one-way relationship; the changes in CO₂ emission also affect FDI entries. (3) The results also provide evidence for the existence of the EKC hypothesis in Turkey. Within the frame of related findings, the study concludes several polities and presents various suggestions.