Balancing growth and sustainability: The impact of Greenfield investment on trade adjusted carbon emissions

Abstract

In the last two decades, the surge in carbon emissions has escalated environmental damage and is a major concern globally. Recognized as a significant threat to humanity, unchecked environmental degradation can potentially hinder the achievement of sustainable development. As a result, accurate monitoring of carbon emissions becomes imperative for formulating effective climate policies. Taking into consideration, this study has taken the newly developed consumption-based carbon emissions measure to study the pollution haven hypothesis and examine the link between Greenfield Investment (GFI) inflows to host nations and their environmental impact for 85 developing countries from 1990 to 2020. The results show a positive correlation between Greenfield investment and Consumption-based Carbon Dioxide Emissions (CCO₂) in sampled nations. Similarly, energy usage and export damage the environment because developing countries rely on conventional and old methods of energy usage. The results were further analyzed for low, lower middle, and upper middle income countries as well. The subsample outcome shows that Greenfield investment has a more damaged environment in low income countries as compared to lower middle and upper middle income countries. These insights underscore the urgency for developing countries to adopt environmentally conscious policies to attract international investors. It also emphasizes the need for stringent regulations aimed at curbing environmental pollution and complying with the Sustainable Development Goals (SDGs). Similarly, low and lower middle income countries to attract Greenfield investment, may also focus more on strict environmental pollution policies. Industries must be shifted from conventional energy methods to renewable energy sources. Sustainable Development Goals; 7, 12, and 13 can be achieved by host countries, alluring investors to invest in terms of Greenfield in renewable energy resources, which would be used in automobile transportation, to shift industries from conventional energy resources to renewable energy resources. The same Greenfield investment would also be used in bringing efficient machinery for more production in industries with minimal environmental pollution.