Impact of government expenditures, foreign direct investment, trade openness, and energy consumption on ecological footprints in selected Asian economies

Samreen Gillani () and Hafiz Syed Mohsin Abbas ()
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Samreen Gillani: University of Central Punjab
Hafiz Syed Mohsin Abbas: Huazhong University of Science and Technology (HUST-Main Campus)

Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, 2025, vol. 27, issue 2, No 59, 4167-4184

Abstract: Abstract Environmental protection and state development are the two critical aspects of sustainability. Environmental degradation is a global concern that calls for effective climate and development policies. Environmental degradation is caused by aggressive industrialization, ecological destruction, and human activities. This study examines the dynamics of foreign direct investment (FDI), trade, energy consumption, and government spending and their potential individual and combined effects on CO2 emissions and climate degradation in 41 Asian nations between 1996 and 2020. The application of Driscoll–Kraay’s standard error and Fixed Effect revealed that, except for trade, all these factors significantly contribute to rising CO2 emissions in the sample countries. However, when paired with energy use, it substantially lowers CO2 discharge. Additionally, FDI, GDP per capita, and energy consumption dramatically reduce emissions. Accordingly, the study recommends governments divide FDI into clean and energy-efficient technologies. To minimize CO2 emissions, commerce must be done in the transfer of advanced renewable energy resources and the export of goods with little to no fossil fuel content. When deciding on incentives for environmental improvements in Asia, governments should consider how to use FDI and GDP per capita to promote trade in energy-related tools or materials. It also recommends that nations allocate FDI to domestic projects and businesses using clean and energy-efficient technologies and enter into bilateral climate change agreements accordingly.

Keywords: Asian economies; CO2 emission; Driscoll–Kraay standard error; Fixed effect; Environmental degradation; Economic prosperity; International trade (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s10668-023-04067-2

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