Does foreign direct investments impair the ecological footprint? New evidence from the panel quantile regression

Modeling the ecological footprint and assessing its influential factors: A systematic review

BACKGROUND

Various factors have been found responsible for the increment in ecological footprint resulting difficulties in maintaining environmental sustainability. This has been noticed through a modeling perspective. Identifying the factors affecting Ecological Footprint helps policymakers to formulate policies regarding sustainability. However, studies conducted based upon systematic reviews on Ecological Footprint through modeling are still limited.

OBJECTIVE

This study intends to identify influential factors associated with ecological footprint through a systematic review.

METHODS

ProQuest, Science Direct, Scopus, and Web of Science databases were used to search literature systematically. Particular keywords and Boolean operators were applied to dig out relevant studies for the review. Peer-reviewed research articles published in the English language till September 13, 2023, were incorporated for the analysis. Following the guidelines of Preferred Reporting Items for Systematic Review and Meta-Analysis (PRISMA), 1011 articles were identified from four different databases and only 37 research papers were eligible for this study. These articles were assessed and relevant information was extracted and then amalgamated into the systematic review.

RESULTS

Gross domestic product, urbanization, energy consumption, renewable energy, non-renewable energy, natural resources, bio-capacity, human capital, foreign direct investment, trade openness, and financial development were observed as key factors of the ecological footprint.

CONCLUSION

Factors known to influence ecological footprint need to be addressed properly for environmental sustainability including widespread use of renewable energy.

Foreign investments and load capacity factor in BRICS: the moderating role of environmental policy stringency

This research examines whether environmental regulations have a moderating effect on the link between foreign direct investment and the environment, as well as the effect of foreign capital investments on environmental quality for BRICS nations. In this approach, using second-generation panel data methodologies for the period 1992-2020, the impacts of foreign direct investments, real national income, consumption of renewable energy, and environmental stringency index on the load capacity factor are explored in the base empirical model. In order to test if there is any evidence of a potential parabolic link between economic growth and environmental quality, the model also includes the square of real national income. In addition, in the robustness model, the moderating role of environmental policy on foreign investment and environmental quality is checked. Empirical results show a U-shaped association between environmental quality and economic development. The usage of renewable energy and the environmental stringency index is also shown to improve environmental quality, although foreign direct investments decrease it. Finally, it is determined that environmental regulations are effective in undoing the negative impacts of foreign capital investments on environmental quality, demonstrating the validity of their moderating function.

What level of renewable energy production will reduce ecological footprint without compromising trade? Evidence from Shanghai Cooperation Organization nations

In order to decarbonize the global economy and reduce environmental degradation, it has become necessary to switch from using fossil fuels to renewable energy. However, a net zero global economy cannot be achieved without understanding the total renewable energy generation threshold and associated investment amount. This study estimates the renewable energy generation threshold to mitigate environmental degradation using data from 2003 to 2019 while focusing on Shanghai Cooperation Organization (SCO) nations. A panel fully modified model and the eight permanent nations of the SCO are employed. Our results show that while trade openness, foreign direct investment, and economic activities positively drive environmental degradation, renewable energy generation is a negative driver, and population has no relationship with environmental degradation. The threshold analysis shows that SCO nations need to increase their renewable energy generation from the current average of 2.403 to 7.737. Policy recommendation regarding how these nations can raise this money has been provided.

Ecological footprints and sustainable environmental management: A critical view of China's economy

Global economies have recently been concerned about sustainable environmental management by reducing emissions and tackling ecological footprints. The rapid economic expansion and investment in traditional manufacturing further raises environmental degradation. China surpasses other emerging economies in the economic growth race yet has remained the top pollution-emitting economy for the last few decades, necessitating scholarly attention. This study examines the influencing factors of ecological footprints in China from the perspective of COP27. Using the extended dataset from 1988 to 2021, this study uses several time series diagnostic tests and verifies the existence of the long-run association between the study variables. Consequently, the non-linear scattered data leads to non-parametric (method of moment quantile regression) adoption. The empirical results indicate that only economic growth is a significant factor in environmental quality degradation in China. However, improving renewable energy usage, research and development, and foreign direct investment reduces the country's ecological footprint. Hence, the latter variables substantially lead to environmental sustainability. The robustness of the results is confirmed via a robust non-parametric estimator and causality test. Based on the empirical results, this study recommends increased investment in research and development, renewable production, and foreign direct investment enhancement.

Democracy, green energy, trade, and environmental progress in South Asia: Advanced quantile regression perspective

Unquestionably, the industrial revolution of the twenty-first century contributes to global warming. Excessive amounts of carbon emissions into the atmosphere are responsible for global warming. Therefore, this research aims to assess the impact of GDP, green energy consumption, population, trade openness, and democracy on CO2 emissions in four selected South Asian countries from 1990 to 2019. This research also attempts to evaluate the EKC hypothesis in terms of economic growth (GDP2). The unit root of panel data and cointegration tests are executed in this study as a prelude to the regression analysis. Quantile regression for panel data, which (Powell, 2016) devised to deal with the fixed effect problem, is used in this study, and (Powell, 2016) empirical findings are the main focus. The estimated coefficient of GDP is positively significant, demonstrating that economic activity increases the burning of fossil fuels and upsurges atmospheric CO2 emissions. After attaining economic development, the reversed U-shaped EKC theory is valid for four selected South Asian countries. Economic development encourages these countries to use green technology, which helps mitigate CO2 emissions. The research, however, reveals that green energy is to blame for CO2 emissions. Burning biomass releases carbon dioxide that negatively impacts the quality of the environment. The study confirms that human activities are the leading contributor to environmental deterioration. Population growth has a worsening effect on the environment. The association between population and CO2 emissions is positively significant. The estimated coefficient of trade openness is positive, which increases CO2 emissions significantly. The estimated coefficient of democracy is quite negative. Therefore, this study suggests prioritizing democracy to reduce CO2 emissions. Citizens who live in democracies are better informed, more organized, and able to protest, all of which contribute to increased government responsiveness to environmental preservation. The results of the Wald test support the differential effects at various quantiles. The Dumitrescu-Hurlin (2012) panel causality tests are also used in this analysis to check causality between variables. Based on the findings, this research makes many policy suggestions for lowering carbon emissions.

Elongating the role of renewable energy and sustainable foreign direct investment on environmental degradation

Climatic variations and GHG emissions are the most debated issues of the current age economically, socially, politically and environmentally. An internationally legally binding treaty on climate change, the "Paris Agreement" is followed by G-8 countries to maintain environmental sustainability with green development. The research investigates the relationship of GHG emissions with renewable energy (RE), foreign direct investment (FDI), total population (TP), and trade (TR). The time span of 22 years is used for analytical purposes covering the period from 2000 to 2021 b y addressing the literary gap. The analytical procession found total population and trade increase GHG emissions because of its modern fundamental layers toxic human activities and polluted trade practices. The decreasing behavior toward GHG emissions has been determined by FDI and RE. The findings of this research have confirmed the long-run relationship among variables. They are evidence that the eco-innovative steps by G-8 countries significantly reduce GHG emissions directly or indirectly. Furthermore, the analytical outcomes indicate that innovative green development in renewable energy sector can reduce the GHG emissions pressure from this sector and contribute to net zero emissions. The extracting results have suggested policies for environmental practitioners and economic developers.

Determinants of the CO2 emissions, economic growth, and ecological footprint in Pakistan: asymmetric and symmetric role of agricultural and financial inclusion

In this study, the effects of financial inclusion (FI), agricultural innovation (AI), trade (TR), and forest rent (FR) on carbon dioxide emissions (CO₂), economic growth (Y), and ecological footprint (EFP) for Pakistan from 1970 to 2017 are examined using symmetric and asymmetric cointegration approaches. These links are investigated using linear and non-linear autoregressive distributive lag (NARDL) techniques. In contrast to the asymmetry results, the symmetric results revealed no cointegration among the variables over the long run. Moreover, asymmetry results from the Y-model indicated that a positive shock in AI significantly affects Y over the long run while raising it over the short term. Furthermore, CO₂ rises in the wake of positive shocks like AI, Y, and FR but falls in the wake of adverse shocks. A negative shock to FI raises CO₂ temporarily, whereas a negative shock to FR causes CO₂ emissions to fall over time. According to the EFP-model, long-term EFP is decreased by both positive shocks to AI and adverse shocks to FR with one-period lags. On the other hand, positive shocks to FI and FR cause the short-term EFP to rise. In addition to a bidirectional causal relationship between Y, EFP, and FI, we found a one-way causative relationship between Y, FR, AI, CO₂, and EFP. The FMOLS estimator also supports NARDL estimations. The key recommendations to help Pakistan keep its environment and economy are to enhance green mechanization in agriculture, allocate adequate research and development funds, and initiate integrated environmental and economic growth policies by relevant institutions.

Effect of foreign direct investment on environmental quality in West Africa

Foreign direct investment (FDI) is known to be beneficial because of the positive externalities it generates in the recipient economy, whether in developed or developing countries. With a view to achieving the Sustainable Development Goals (SDGs), West African countries are investing in attracting foreign investors, as evidenced by the upsurge in FDI flows observed over the past two decades and the reforms and attractiveness policies put in place. In West Africa, this FDI, which is mainly directed towards the natural resource extraction sectors, has consequences for the quality of the environment. This paper focuses on analyzing the effect of FDI on environmental quality in 13 West African countries over the period 2000-2020. This research uses a panel quantile regression with nonadditive fixed effect. The main results obtained indicate a negative effect of FDI on environmental quality reflecting the existence of the pollution haven hypothesis in the area. In addition, we find evidence of the U shape of the environmental Kuznets curve (EKC), invalidating the environmental Kuznets curve (EKC) hypothesis. West African governments should implement green investment and financing strategies and encourage the use of new green technologies and clean energy to improve environmental quality.

Moderation of Services' EKC through Transportation Competitiveness: PQR Model in Global Prospective

The continuously increasing GHG emissions have created environmental pollution and several challenges to ecosystems and biodiversity. The challenges of climate change are multipronged, resulting in melting glaciers, flash floods, and severe heat waves. In this regard, the adaptive and mitigation strategies to manage the consequences of climate change are highly important. The transport sector creates a quarter of carbon emissions, and this share is continuously increasing. Accordingly, this research study uses transport competitiveness to determine carbon emissions of the transport sector for 121 countries covering the time period from 2008 to 2018. The Panel Quantile Regression (PQR) technique is engaged to analyze the study results. The findings highlight that transport competitiveness tends to increase carbon emissions of the transport sector across quantile groups 1 and 3, while it reduces carbon emissions in quantile group 2. The U-shaped services' EKC is validated in quantile groups 2 and 4. The moderation engaged, i.e., transportation competitiveness, changes the turning point of the services' EKC across quantile groups 2 and 4. However, in the high-CO₂ quantile group, the moderation impact of transport competitiveness is strongest as it reduces the sensitivity by flattening the services' EKC. Furthermore, the planned expansion of the population and improved institutional quality tend to mitigate carbon emissions across different quantile groups. The policy relevance/implications that are based on the study results/findings are made part of the research paper.

Linking natural resources, innovations, and environment in the Belt and Road Initiative countries using dynamic panel techniques: the role of innovations and renewable energy consumption

The issue of natural resources and environment are a matter of clashing argument in recent studies. An increase in natural resources raises economic growth which in turn increases carbon emission, that is a challenge for environmental sustainability. There is a lack of research on weather innovations playing any important role by acquiring renewable energy sources, enhancing energy efficiency, and boosting economic growth by lowering the use of natural resources to raise environmental quality. Consequently, this study investigates the effect of natural resources, innovations, economic growth, and renewable energy consumption on carbon dioxide emission in 39 Belt and Road Initiative countries from 1981 to 2019. OLS, fixed effect, and generalized method of moments models were used for analysis, where the results indicate that natural resources, innovations, and economic growth significantly increase carbon dioxide emission, while renewable energy reduces emission and raises environmental quality. The square term of natural resources is negative; thus, it indicates that natural resource use reduces emission when it reaches a certain level. Likewise, our results validate the Environmental Kuznets Curve hypothesis in the Belt and Road initiative countries. The findings have considerable policy implications for the Belt and Road countries regarding natural resource use, innovations, and renewable energy consumption.

Spatial impact of foreign direct investment on ecological footprint in Africa

This study examines the spatial impact of FDI on ecological footprint of 31 African countries. In achieving this, the study uses the Driscoll-Kraay (1998) random effect model, fixed-effect instrumental variable regression, and the spatial Durbin model. There are three main important findings from this empirical study. First, FDI has a nonlinear impact on ecological footprint in Africa. At the initial stage, FDI reduces ecological footprint up to a threshold of $404.75-$669.96 million, before the impact increases ecological degradation. This result is robust to the instrumental regression model. Second, the results further reveal a significant spatial spillover of FDI on ecological footprint in Africa. Third, the empirical results provide evidence of both direct and spillover effects of environmental degradation determinant in Africa. This denotes that environmental quality of a particular country influences the environmental quality of other neighbouring countries. While it is important to attract significant amount of foreign investment to Africa, this study recommends that African governments need to improve their environmental regulations and laws to achieve transfer of energy-saving technology from foreign investors.

Do foreign direct investments influence environmental degradation? Evidence from a panel autoregressive distributed lag model approach to low-, lower-middle-, upper-middle-, and high-income countries

The main aim of the present study is to examine the possible nonlinear relations between foreign direct investments and environmental deterioration for subpanels separated according to the income levels of countries by using the classification made by the World Bank. Total energy consumption, economic growth, and renewable energy share are also considered as determinants of environmental deterioration in the model. Cross-sectional dependence is observed; hence, appropriate panel data unit root and cointegration tests are utilized for which results pointed out mixed integration order. Pooled mean group (PMG) estimator panel auto-regressive distributed lag (ARDL, hereafter) approach is adapted to observe short- and long-run relationships between the variables. Long-run results supported the pollution haven hypothesis as foreign direct investments caused an increase in ecological footprint. Findings are sensitive to different income levels of the subpanels of countries. This empirical study suggests tailored policymaking for every income level subpanel to ensure sustainable development.

Environmental strategies for achieving a new foreign direct investment golden decade in Algeria

While numerous studies have discussed the impact of economic growth on the environment, this paper advances in the empirical literature, aiming to validate the existence of an N-shaped environmental Kuznets curve (EKC) relationship between the ecological footprint and economic growth in Algeria during the period 1975-2014. The proposed empirical model includes as additional explanatory variables the foreign direct investment (FDI) and the electricity consumption aimed to increase the relevance of the results, correcting the lack of studies that have previously analyzed the EKC for the case of Algeria. Through the ARDL econometric approach, we confirm an N-shaped EKC between the per capita economic growth and ecological footprint in Algeria, reinforcing these results using the FMOLS and DOLS techniques. In the long run, the empirical results confirmed that the N-shaped EKC in Algeria is valid; electricity consumption and foreign direct investment directly impact ecological footprint. Even though the main objective of this study is to assess the N-shaped EKC, the novelty of the paper is the analysis of the interaction between FDI and electricity consumption. The empirical evidence reveals that FDI contributes to reducing the negative impact of fossil sources in the energy mix in Algeria through the transition to a cleaner energy mix pattern. In the final step of our analysis, we explore the causal nexus among variables by applying the Toda Yamamoto non-causality test. The Toda Yamamoto non-causality test reveals a unidirectional causality between economic growth and ecological footprint; one-run relationship flows from electricity consumption to ecological footprint, and economic growth leads to cause foreign-direct investment. These empirical results evidence the necessity of establishing suitable policies after the gold decade of the FDI in Algeria, being required to advance in this line to come back to ascending levels of FDI after the financial crisis of 2008 and the current COVID-19 crisis. In this sense, policymakers should consider the advantages of FDI for promoting clean foreign investment, necessary for reaching a transition to sustainable development in Algeria. In this sense, this study proposes a battery of environmental strategies to achieve this objective and sustainable growth in the country. Thus, policy implications and directions for future research are suggested.

Modelling the effects of energy diversification on ecological footprint: evidence from Côte d'Ivoire

Energy diversification is a vital contribution to sustainable development. Many countries are accelerating the diversification of their energy mix to meet the challenges of the energy transition. This study aims to model and investigate the effects of energy diversification on the ecological footprint of production in Côte d'Ivoire. The study uses an autoregressive distributed lag model with structural breaks and covers the period 1971-2015. Energy diversification is measured by an "Energy Mix Concentration Index," a concentration indicator based on the Herfindahl-Hirschman Index. The results suggest that, in the short term, energy diversification reduces the ecological footprint of production in Côte d'Ivoire, and is conducive for environmental protection. In the long term, energy diversification also has a reducing effect on the ecological footprint of production up to a certain threshold where energy concentration increases the ecological footprint. The study finds that there is an optimal level of energy diversification that is ideal for achieving a lower impact of energy diversification activities and exploitation of energy production sources on the environment in Côte d'Ivoire. The commissioning of the Azito power plant in 1999, which produces electricity using natural gas, has also had a major impact, not only on the country's energy mix since then, but also on its ecological footprint of production.

The role of technological innovation and diffusion, energy consumption and financial development in affecting ecological footprint in BRICS: an empirical analysis

Economic activities, technological innovation and diffusion, energy consumption and financial development have been significant in BRICS countries over the last three decades. Corresponding to it, BRICS have been facing substantial environmental deterioration. The growth of such factors needs a comprehensive analysis. Hence, this paper examines the impact of technological innovation and diffusion, renewable and non-renewable energy consumption and financial development on ecological footprint under the Kuznets framework in BRICS countries over the time from 1990 to 2018. To confirm the long- and short-run relationship, we apply the second-generation and heterogeneity panel techniques. Where, to measure the impact of technological innovation and diffusion, energy consumption and financial development and other control variable on ecological footprint we use Westerlund Co-integration and pooled mean group (PMG) model for this interest. The results reveal that technological diffusion and non-renewable energy consumption deteriorate environmental quality in the long run. In contrast, renewable energy and technological innovation improve environmental sustainability/quality significantly. Further, results also confirm the existence of the EKC hypothesis. The study suggests that the government should encourage technological innovation and renewable energy consumption to improve environmental quality and achieve the sustainable development goal (SDG).

Financial development and environmental sustainability in West Africa: evidence from heterogeneous and cross-sectionally correlated models

Although West African nations are flourishing economically of late, they still have environmental issues due to the high rate of emissions in the bloc. Despite the worsening environmental condition, there have been limited studies on the causal agents of this situation in the region. Therefore, drawing strength from the United Nations' Sustainable Development Goals (SDGs) and their targeted impacts of 2030, this study explored the nexus between financial development and environmental sustainability in West Africa (WA) for the period 1990 to 2016. The cross-sectional autoregressive distributed lag (CS-ARDL) estimator alongside the cross-sectionally augmented distributed lag (CS-DL) and the cross-sectional augmented error correction (CAEC) estimators were engaged to examine the elastic effects of the explanatory variables on the explained variable and from the results, financial development was harmful to environmental sustainability in WA through high carbon emissions. Also, control variables foreign direct investments, energy consumption, industrialization, and population growth were detrimental to the sustainability of the environment. On the causal connections amid the series, a unidirectional causality from financial development and population growth to carbon emissions was uncovered. Also, feedback causalities between foreign direct investments and carbon emissions, between energy consumption and the effluents of carbon, and between industrialization and environmental pollution were unraveled. Based on the findings, the study recommended among others that the countries should integrate environmental welfare objectives into their financial development policies. Also, the nations should ensure that their citizens have access to energy that is affordable, reliable, sustainable, and modern (SDG 7). Finally, improvement in energy efficiency, sustainable infrastructure, and good use of resources (SDG 12) should be promoted by the nations. The above recommendations if seriously taken into consideration will help the region to combat climate change and its impacts, which is the focus of SDG 13. The main flaw of this exploration was the lack of data for some specific time periods. Therefore, in future when such data become available, similar investigations could be carried out to confirm the robustness of the study's results.

Foreign Direct Investments, Renewable Electricity Output, and Ecological Footprints: Do Financial Globalization Facilitate Renewable Energy Transition and Environmental Welfare in Bangladesh?

Phasing out fossil fuel dependency to adopt renewable energy technologies is pertinent for both ensuring energy security and for safeguarding the well-being of the environment. However, financial constraints often restrict the developing countries, in particular, from undergoing the renewable energy transition that is necessary for easing the environmental hardships. Against this background, this study makes a novel attempt to evaluate the impacts of FDI inflows on enhancing renewable energy use and attaining environmental sustainability in Bangladesh between 1972 and 2015. Using the autoregressive distributed lags with structural break approach to estimate the short- and long-run elasticities, it is found that FDI inflows enhance the share of renewable electricity output in the total electricity output levels of the country. Besides, FDI inflows are also evidenced to directly hamper environmental quality by boosting the ecological footprints figures of Bangladesh. Hence, it can be said that FDI promotes renewable electricity generation in Bangladesh but transforms the nation into a pollution haven. However, although FDI inflows cannot directly reduce the ecological footprints, a joint ecological footprint mitigation impact of FDI inflows and renewable electricity generation is evidenced. Besides, the findings also verify the authenticity of the Environmental Kuznets Curve hypothesis in Bangladesh’s context. Therefore, economic growth can be referred to as being both the cause and the panacea to the environmental problems faced by Bangladesh. These results, in a nutshell, calls for effective measures to be undertaken for attracting the relatively cleaner FDI in Bangladesh whereby the objectives of renewable energy transition and environmental sustainability can be achieved in tandem. In line with these findings, several appropriate financial globalization policies are recommended.

The heterogeneous effects of urbanisation and institutional quality on greenhouse gas emissions in Belt and Road Initiative countries

The rise of urbanisation in Belt and Road Initiative (BRI) countries that contribute to the disruption of the ecosystem, which would affect global sustainability, is a pressing concern. This study provides new evidence of the impact of urbanisation and institutional quality on greenhouse gas (GHG) emissions in the selected 48 BRI countries from the years 1984 to 2017. The models of this study are inferred by using panel regression model and panel quantile regression model to meet the objectives of our study as it contemplates unobserved country heterogeneity. From the panel regression model, the findings indicate that although urbanisation in BRI supports the 'life effect' hypothesis that could dampen the environment quality, this effect could be reduced through better institutional quality. Using the quantile regression method, this study concludes that one-size-fits-all strategies to reduce GHG emissions in countries with different GHG emissions levels are improbable to achieve success for all. Hence, GHG emissions control procedures should be adjusted differently across high-emission, middle-emission and low-emission countries. Based on these results, this study provides novel intuitions for policymakers to wisely plan the urbanisation blueprints to eradicate unplanned urbanisation and improve institutional quality in meeting pollution mitigation goals.