Interrelationships among foreign direct investments, renewable energy, and CO2 emissions for different European country groups: a panel ARDL approach

MERT M., BÖLÜK G., ÇAĞLAR A. E.

ENVIRONMENTAL SCIENCE AND POLLUTION RESEARCH, vol.26, no.21, pp.21495-21510, 2019 (SCI-Expanded) identifier identifier identifier

  • Publication Type: Article / Article
  • Volume: 26 Issue: 21
  • Publication Date: 2019
  • Doi Number: 10.1007/s11356-019-05415-4
  • Journal Name: ENVIRONMENTAL SCIENCE AND POLLUTION RESEARCH
  • Journal Indexes: Science Citation Index Expanded (SCI-EXPANDED), Scopus
  • Page Numbers: pp.21495-21510
  • Keywords: Foreign direct investment, Panel co-integration, Pollution haven hypothesis, Pollution halo hypothesis, Renewable energy, EKC, ENVIRONMENTAL KUZNETS CURVE, CARBON-DIOXIDE EMISSIONS, ECONOMIC-GROWTH EVIDENCE, POLLUTION HAVEN HYPOTHESIS, MEAN GROUP ESTIMATION, UNIT-ROOT TESTS, NONRENEWABLE ENERGY, CAUSALITY ANALYSIS, EKC HYPOTHESIS, DEGRADATION EVIDENCE
  • Akdeniz University Affiliated: Yes

Abstract

This study estimated unbalanced panel data analysis to investigate the relationship among CO2 emissions, GDP, renewable and non-renewable energy utilization, and foreign direct investment (FDI) inflow in 26 European countries. Moreover, we investigated the role of environmental regulations in validation of the pollution haven hypothesis (PHH) in two EU country groups, namely 1-4th and 5th enlargement countries of EU, since their adaptation periods of environmental legislation may indicate differences. Empirical results confirmed the validation of environmental Kuznets curve (EKC) hypothesis and PHH for overall EU countries. However, results differ between country groups in EU. For example, while results confirm the evidence of EKC in 5th enlargement countries, they do not support in 1-4th enlargement countries. Moreover, while environmental regulations do not play an important role in the validity of PHH, they are important factors in the validity of EKC in overall EU countries. Granger causalities showed that economic growth causes energy consumption and FDI inflow. Since renewable energy mitigates the emissions, EU countries should enhance green technology and energy efficiency to ensure sustainable development. What is more, EU countries need to tighten the environmental regulations on FDI inflow. Therefore, our results support the new framework by European Commission on screening the FDI inflows throughout the EU zone.