Foreign Direct Investment–CO2 Emissions Nexus in Middle East and North African countries: Importance of Biomass Energy Consumption

Muhammad Shahbaz, Daniel Balsalobre-Lorente and Avik Sinha

MPRA Paper from University Library of Munich, Germany

Abstract: This study examines the association between foreign direct investment (FDI) and carbon emissions for the Middle East and North African (MENA) region in 1990–2015, including biomass energy consumption as an additional determinant of carbon emissions. We apply the generalized method of moments (GMM) to validate the existence of the pollution haven hypothesis (PHH). The N-shaped association is also validated between FDI and carbon emissions. The link between economic growth and carbon emissions is inverted-U and N-shaped; that is, it satisfies the environmental Kuznets curve (EKC) hypotheses. Biomass energy use lowers carbon emissions, and the causality analysis reveals that FDI causes CO2 emissions. Clearly, the results confirm the existence of a feedback effect between economic growth and carbon emissions. The connection between biomass energy use and CO2 emissions is also bidirectional. The empirical findings suggest policy makers to design comprehensive trade and energy policies by targeting the cleaner production practices, for not only to ensure environmental sustainability, but also to fulfil the objectives of sustainable development goals.

Keywords: Foreign Direct Investment; Carbon Emissions; Middle East and North Africa; Generalized Method of Moments; Biomass Energy (search for similar items in EconPapers)
JEL-codes: Q5 (search for similar items in EconPapers)
Date: 2019-01-03, Revised 2019-01-19
New Economics Papers: this item is included in nep-ara, nep-ene, nep-env and nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (144)

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