The Impacts of FDI Inflows on Carbon Emissions: Economic Development and Regulatory Quality as Moderators

Abstract

With the accelerated development of the global economy, environmental issues have gradually become prominent, which in turn hinders further high-quality economic development. As one of the important driving factors, cross-border flowing foreign direct investment (FDI) has played a vital role in promoting economic development, but has also caused environmental degradation in most host countries. Utilizing panel data for the G20 economies from 1996 to 2018, the purpose of this study is to investigate the impacts of FDI inflows on carbon emissions, and further explore the influence channels through the moderating effects of economic development and regulatory quality. To produce more robust and accurate results in this study, the approach of the feasible generalized least squares (FGLS) is utilized. Meanwhile, this study also specifies the heteroscedasticity and correlated errors due to the large differences and serial correlations among the G20 economies. The results indicate that FDI inflows are positively associated with carbon emissions, as well as both economic development and regulatory quality negatively contribute to the impacts of FDI inflows on carbon emissions. It implies that although FDI inflows tend to increase the emissions of carbon dioxide, they are more likely to mitigate carbon emissions in countries with higher levels of economic development and regulatory quality. Therefore, the findings are informative for policymakers to formulate effective policies to help mitigate carbon emissions and eliminate environmental degradation.

Evaluation of the Effects of Urbanization on Carbon Emissions: The Transformative Role of Government Effectiveness

“…Meanwhile, the imports of goods and services (lnimport) significantly and positively contribute to the OECD countries' carbon emissions, which is in line with the results of Khan et al (2020). As for the economic size, the results show a significantly negative association between real GDP (lnrgdp) and carbon emissions, which is endorsed by Huang et al (2022) and Aller et al (2021). As assumed in the EKC hypothesis, a country with a greater economic size tends to be more environmentally friendly and thereby be more likely to improve production technologies and further positively contribute to mitigating carbon emissions.…”

“…Besides, all country dummies (μ i ) and year dummies (ω t ) are included to produce more accurate estimates. Following the specification of Ali et al (2021) and Huang et al (2022), the variables such as the exports of goods and services (lnexport), real GDP (lnrgdp), imports of goods and services (lnimport), gross savings (lngrosav), hightechnology exports (lnhtexpt), the labor force (lnlabfor), and arable land (arland) are incorporated as control variables. Except for the variables of rurbpop and arland, this study takes all other variables in the natural logarithm forms.…”

“…As for the variable of regulatory quality, the data in 1997, 1999, and 2001 are missing. Following the method of Huang et al (2022), this study imputed the missing values in 1997, 1999, and 2001 using the mean of the data in 1996 and 1998, the mean of the data in 1998 and 2000, and the mean of the data in 2000 and 2002, respectively. Additionally, other missing values of related variables are filled in with the mean values of the data of two consecutive years.…”

Reinvestigating the Presence of Environmental Kuznets Curve in Malaysia: The Role of Foreign Direct Investment

“…This dominance continued throughout the first half of the 20 th century. However, other parts of the world, particularly Asia as a whole, while China was the largest carbon emissions county, made up the world's total carbon emissions in the 2000s (Huang et al, 2022). Global warming, ecosystem imbalance, macroeconomic problems, technological problems, and socioeconomic issues are problems brought on due to climate change.…”

“…The link has been studied in previous studies across regions (Suki et al, 2020). As the Pollution Haven Hypothesis (PHH) argues, FDI inflows could hasten environmental degradation (Huang et al, 2022;Esquivias et al, 2022). According to the theory, businesses in industries with high pollution levels are most frequently located in nations or areas with lax environmental regulations, which could result in excessive or inadequate pollution levels.…”