Foreign direct Investment–CO 2 emissions nexus in Middle East and North African countries: Importance of biomass energy consumption

Shahbaz M., Balsalobre Lorente D., Sinha A.

Journal of Cleaner Production, vol.217, pp.603-614, 2019 (SCI-Expanded, Scopus) identifier identifier

  • Publication Type: Article / Article
  • Volume: 217
  • Publication Date: 2019
  • Doi Number: 10.1016/j.jclepro.2019.01.282
  • Journal Name: Journal of Cleaner Production
  • Journal Indexes: Science Citation Index Expanded (SCI-EXPANDED), Scopus
  • Page Numbers: pp.603-614
  • Keywords: Biomass energy, Carbon emissions, Foreign direct investment, Generalized method of moments, Middle East and North Africa
  • Open Archive Collection: Article
  • Azerbaijan State University of Economics (UNEC) Affiliated: Yes

Abstract

This study examines the association between foreign direct investment (FDI) and carbon emissions for the Middle East and North African (MENA) region in 1990–2015, including biomass energy consumption as an additional determinant of carbon emissions. We apply the generalized method of moments (GMM) to validate the existence of the pollution haven hypothesis (PHH). The N-shaped association is also validated between FDI and carbon emissions. The link between economic growth and carbon emissions is inverted-U and N-shaped; that is, it satisfies the environmental Kuznets curve (EKC) hypotheses. Biomass energy use lowers carbon emissions, and the causality analysis reveals that FDI causes CO 2 emissions. Clearly, the results confirm the existence of a feedback effect between economic growth and carbon emissions. The connection between biomass energy use and CO 2 emissions is also bidirectional. The empirical findings suggest policy makers to design comprehensive trade and energy policies by targeting the cleaner production practices, for not only to ensure environmental sustainability, but also to fulfil the objectives of sustainable development goals.