Foreign direct investment, renewable energy transition, and social-economic impacts: evidence from panel cointegration and causality analysis
Energy Strategy Reviews, vol.65, 2026 (SCI-Expanded, Scopus)
- Publication Type: Article / Article
- Volume: 65
- Publication Date: 2026
- Doi Number: 10.1016/j.esr.2026.102158
- Journal Name: Energy Strategy Reviews
- Journal Indexes: Science Citation Index Expanded (SCI-EXPANDED), Scopus, Compendex, INSPEC, Directory of Open Access Journals
- Keywords: Economic growth, ECOWAS, Foreign direct investment, Granger causality, Panel cointegration, Pollution haven hypothesis, Renewable energy consumption
- Azerbaijan State University of Economics (UNEC) Affiliated: Yes
Abstract
This study empirically investigates the dynamic interrelationships among Foreign Direct Investment (FDI), renewable energy consumption, and economic growth within the West African sub-region, a context characterized by distinct energy infrastructure deficits and ambitious development goals. Motivated by the critical need to reconcile capital inflows with sustainable development trajectories, the research utilizes panel data spanning recent decades to examine whether foreign capital acts as a catalyst for green energy transition or merely fuels conventional industrial growth. By employing advanced econometric techniques to test for cointegration and causality, the analysis reveals that while FDI significantly drives economic growth through capital accumulation and technology transfer, its impact on renewable energy consumption remains complex and non-linear. The findings suggest that although FDI contributes to the expansion of the energy sector, the "pollution haven" hypothesis may still hold relevance in certain contexts where investment flows are directed toward extractive or carbon-intensive industries rather than renewable infrastructure. Furthermore, the study identifies a bidirectional causal link between economic growth and renewable energy consumption, indicating that energy security is both a prerequisite for and a consequence of development. Consequently, the research concludes that attracting FDI alone is insufficient for sustainable outcomes; rather, West African policymakers must implement targeted regulatory frameworks and "green" investment incentives to ensure that foreign capital effectively bridges the technological gap and fosters a transition toward a low-carbon economy.