Could Private Investment in Energy Infrastructure soften the environmental impacts of Foreign Direct Investment? An assessment of developing countries

Rafaela Vital Caetano, António Cardoso Marques, Tiago Lopes Afonso and Isabel Vieira ()

Economic Analysis and Policy, 2023, vol. 80, issue C, 961-977

Abstract: When developed countries invest in developing countries there is often a trade-off between economic growth and environmental quality, but is this inevitable? Previous studies have concluded that one consequence of Foreign Direct Investment (FDI) is the transfer of polluting industries. However, there has been insufficient analysis of the pollutant consequence of this investment, as this may arise from the lack of renewable energy infrastructure to satisfy peaked energy demand. Using data from 17 developing countries from 2000–2020, this study undertakes an in-depth analysis of the effects of FDI and Private Participation in Energy Infrastructure (PPEI) investment on economic growth, pollution, and energy transition using a Seemingly Unrelated Regression model. The results reveal that FDI increases pollution and non-renewable energy consumption but, conversely, PPEI promotes energy transition, potentially mitigating the polluting impact of FDI. Developing countries can pursue long-term environmentally-sustainable economic growth by attracting private investment in their energy infrastructure.

Keywords: FDI; Infrastructure; Renewable energy; Energy transition; Pollution; PPI (search for similar items in EconPapers)
JEL-codes: L33 Q20 Q27 Q43 Q50 Q56 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0313592623002370
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ecanpo:v:80:y:2023:i:c:p:961-977

DOI: 10.1016/j.eap.2023.09.030

Access Statistics for this article

Economic Analysis and Policy is currently edited by Clevo Wilson

More articles in Economic Analysis and Policy from Elsevier
Bibliographic data for series maintained by Catherine Liu ().