Economic integration and CO2 emissions: evidence from emerging economies

• Published in: Climate and development 2020-04, Vol.12 (4), p.369-384
• Main Authors: Phuc Nguyen, Canh, Schinckus, Christophe, Dinh Su, Thanh
• Format: Article
• Language: English
• Subjects: Carbon dioxide; Carbon dioxide emissions; Economic integration; Economics; Emerging markets; emissions; Environment; Hypotheses; Industry; International financing; Pollution; Strategy; Trade
• ISSN: 1756-5529; 1756-5537
• DOI: 10.1080/17565529.2019.1630350

The study investigates the influences of FDI inflows and trade openness on CO 2 emissions by using a theoretical framework composed by the STIRPAT model and the EKC hypothesis for 33 emerging economies over the period 1996-2014. Our empirical results show interesting findings. Firstly, there is strong evidence on the existence of the EKC hypothesis for emerging economies. Secondly, FDI inflows significantly contribute to the CO 2 emissions in the short and long term confirming the pollution haven hypothesis according to which foreign investment is made in polluting industries. Trade openness has a positive impact on CO 2 emissions, especially in the short run; however, this variable has a negative impact on the CO 2 emissions in the long run. These observations have also been discussed by components of CO 2 emissions, and they suggest policy-makers to develop an environmentally friendly strategy by adopting a strategy promoting conjointly trade openness and FDI inflows in flexible sectors that can easily integrate the international environmental standards rather FDIs invested in manufacturing\producing sectors - according to our study, such long-term strategy appears to be the best choice for an emerging country to benefit from a 'pollution-halo' (i.e. FDI inflows contribute to reducing the CO 2 emissions).