Long-Run Dynamics of Gas Emissions, Economic Growth, and Low-Carbon Energy in the European Union: The Fostering Effect of FDI and Trade

Alexandra Horobet, Oana Popovici, Emanuela Zlatea, Lucian Belascu, Dan Gabriel Dumitrescu and Stefania Cristina Curea
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Alexandra Horobet: Department of International Business and Economics, Bucharest University of Economic Studies, 010374 București, Romania
Emanuela Zlatea: Department of International Business and Economics, Bucharest University of Economic Studies, 010374 București, Romania
Lucian Belascu: Department of Management, Marketing and Business Administration, “Lucian Blaga” University of Sibiu, 550024 Sibiu, Romania
Dan Gabriel Dumitrescu: Department of International Business and Economics, Bucharest University of Economic Studies, 010374 București, Romania
Stefania Cristina Curea: Department of Financial and Economic Analysis, Bucharest University of Economic Studies, 010374 București, Romania

Energies, 2021, vol. 14, issue 10, 1-30

Abstract: The European Union’s environmental goal by 2050 is to become the first climate-neutral continent in the world. This means specific efforts for diversifying the energy mix and investing in low-carbon energy. Our study investigates the nexus among carbon emissions, energy consumption and mix, and economic growth in a modified framework that includes the contribution of inward foreign direct investments and international trade to lowering air pollution. We have used a two-step approach to explore in more detail the links between these variables in 24 EU countries over the period 1995–2018, followed by a panel VECM analysis. Our results indicate that there is a unidirectional link between economic growth and CO 2 emissions, which should imply a decoupling of environmental improvement measures from the pace of economic growth. We also find bidirectional causal relationships between low-carbon energy shares in consumption and CO 2 emissions, as well as between low-carbon energy share in consumption and GDP per capita, which confirms both pollution haven and the halo effect hypotheses for FDI on gas emissions. However, in the long term, FDI, exports, and imports have positively impacted the reduction in CO 2 emissions; therefore, stronger EU investment and trade integration should be promoted to improve the quality of the environment.

Keywords: gas emissions; low-carbon energy; economic growth; foreign direct investments; trade; European Union (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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