Pollution haven hypothesis (PHH)

Burcu Ozcan

Chapter 93 in Elgar Encyclopedia of Energy Economics, 2025, pp 365-368 from Edward Elgar Publishing

Abstract: This entry explains the pollution haven hypothesis (PHH) theoretically. The PHH is a popular empirical research subject for energy and environmental economics researchers. It deals with the relationship between foreign direct investment (FDI) and energy consumption/environmental quality. The hypothesis suggests that developing or undeveloped countries that host FDI will become pollution havens due to foreign capital inflows. Since developed countries have strict environmental regulations, multinational companies in developed countries cannot carry out energy- and pollution-intensive production processes in their own countries. However, developing and undeveloped countries need more FDI inflows to grow and fight poverty and unemployment problems. Therefore, they must host developed countries’ energy-intensive and dirty production processes. In short, the hypothesis states that FDI inflows lead to environmental pollution by increasing energy consumption in developing and undeveloped countries. In addition, at the end of this entry, the theoretical explanations against the PHH and a few empirical studies that support and do not support the hypothesis have been included.

Keywords: Pollution Haven Hypothesis (PHH); Foreign Direct Investment (FDI); Energy Consumption; Environmental Pollution; Developing Countries; Developed Countries (search for similar items in EconPapers)
Date: 2025
ISBN: 9781035310364
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