THE IMPACT OF TRADE, FOREIGN DIRECT INVESTMENT (FDI), AND ECONOMIC GROWTH ON CARBON DIOXIDE (CO2) EMISSIONS IN SELECTED ASIAN COUNTRIES

Abstract

This study examines the impact of trade, foreign direct investment (FDI), and economic growth on carbon dioxide (CO2) emissions in Selected Asian countries for the period 1990 to 2019. The objectives of this study are (1) to investigate the relationship between trade and CO2 emission, (2) to investigate the relationship between FDI and CO2 emission, and (3) to investigate the relationship between economic growth and CO2 emission. This study uses ordinary least squares (OLS) method to analyze the data. Multicollinearity test, heteroskedasticity test, and serial correlation test were also used to check the stability of the model. In addition, Granger causality test was applied to this study. The results show that there is a significant positive correlation between economic growth and CO2 emissions. If GDP increases by 1%, the average CO2 emission will increase by 0.186%, holding other variables constant. The explanation of trade and FDI on CO2 emissions is insignificant. Multicollinearity, heteroskedasticity and serial correlation are not present in the model of this study. Finally, the results of Granger causality test show that there is no Granger causality between independent variables and dependent variable. The government establishes better environmental regulations and strengthens the regulation of chemical and heavy industry sectors. Promoting technological advancement and investment in new energy technologies, government focus on energy efficiency and environmental initiatives in the corporate sector can effectively curb the growth of CO2 emissions.