Pollution Haven or Environmental Benefit? An Analysis on the Impact of Foreign Direct Investments on Carbon Dioxide Emissions

Abstract

Currently, climate change and the consequential greenhouse effect caused by CO2 emissions are significant issues. A substantial portion of carbon dioxide (CO2) emissions stems from economic activity. Direct investments from one nation to another contribute to a rise in carbon dioxide emissions, despite the existence of several factors. Nevertheless, in response to growing awareness of environmental deterioration, nations and multinational corporations are implementing legislation and allocating more funds to promote eco-friendly investments. This study aims to analyze the correlation between foreign direct investments and carbon dioxide emissions. The research was carried out in 20 developing nations from 2002 to 2020. The primary approach utilized in the study is the Generalized Method of Moments (GMM) analysis. The study reveals that there is a negative correlation between CO2 emissions and both foreign direct investments and population. Conversely, there is a positive correlation between CO2 emissions with economic growth.