Bootstrap ARDL Test on the Relationship among Trade, FDI, and CO2 Emissions: Based on the Experience of BRICS Countries

Abstract

We used the Bootstrap Autoregressive Distributed Lagged Model (ARDL) method to test the relationship among BRICS (Brazil, Russia, India, China, and South Africa) countries’ trade, foreign direct investment (FDI), and CO2 emissions. We found that Brazil’s CO2 emissions and FDI have a cointegration relationship with the trade on the lag of one-period. Russia and India and CO2 emissions and trade have a cointegration relationship with FDI on the lag of one-period. In the long-term, Brazil’s FDI has a long-term causal relationship with the trade on the lag of one-period. The trade between Russia and India has a long-term causal relationship with FDI on the lag of one-period. Among other BRICS variables, Russian trade and FDI on the lag of one-period of CO2 emissions and FDI and CO2 emissions are on the lag of one-period on trade, which McNown et al. mentioned is the degeneration case #1 in their paper; while China’s trade and FDI on the lag of one-period of CO2 emissions is the country of degeneration case #2. When we examined short-term causality, we found that CO2 emissions showed a causal relationship with trade, while FDI and CO2 emissions were less pronounced. Trade has a positive causal relationship with FDI. These variables are different in different situations and in different countries. These results should be related to BRICS countries’ FDI, international trade development, and their different CO2 emission policies.

Theoretical Framework for the Carbon Emissions Effects of Technological Progress and Renewable Energy Consumption

“…Since BRICS counties do not price/tax carbon in their exports and imports (He at al., 2020) to the best of our knowledge, CO2X X = CO2T Y = 1 and CO2M M = CO2T Y = 1 can be written. 2 Then, equation ( 10) can be expressed as:…”

“…With such a large population, there is a huge potential for economic growth and international trade. The economic growth of BRICS countries is growing fast with 51.3% contribution to the global economy merely from 2008 to 2018 (He et al, 2020). Besides economic growth, their contribution to total world trade reached 16.4% from 11.8% during 2008-2018 (He et al, 2020).…”

“…As a percentage of total global, BRICS hold 38.3% of electricity generations, 63.7% of coal production, 21.7% of natural gas production, and 21.2% of oil production in 2016. Similarly, greenhouse gas emissions also reached to 41.3% of the world in 2016 (He et al, 2020). Renewable energy, which is considered a key factor for controlling carbon emissions, is developing at a high rate in BRICS countries.…”

Inward foreign direct investment, outward foreign direct investment, and carbon dioxide emission intensity-threshold regression analysis based on interprovincial panel data

“…As requisite for economic development, developing countries are amalgamating to formulate investment promotion and capital introduction policy named "race to the bottom line," in other words, through attracting foreign capital inflows with the looser environmental regulation (Dechezleprêtre and Sato 2017;Yu et al 2018;Haibo et al 2019;Wang and Liu 2019;He et al 2020;Zhang et al 2020). Thereby opportunities are provided for external migration of pollution-intensive enterprises in developed countries (Chen et al 2019;Wang et al 2019a;Khan and Ozturk 2020), which become the "pollution haven" of developed countries Balsalobre-Lorente et al 2019;Tasri and Karimi 2019).…”

The nexus amid foreign direct investment, urbanization, and CO2 emissions: Evidence from energy grouping along the ECOWAS community

“…Climate change has gained a great deal of attention among environmental economists around the world as a result of its impact on sustainable growth (He et al, 2020). Rafique et al (2020) posit that investment is debated as key to a country's development, particularly foreign direct investment (FDI) inflows.…”