RELATIONSHIP BETWEEN FOREIGN DIRECT INVESTMENT AND CO2 EMISSIONS IN COUNTRIES WITH DIFFERENT INCOME LEVELS

ABSTRACT

This paper analyzed the existing relationship between greenfield and brownfield investments with CO2 emissions worldwide, using data from 170 economies divided according to income. The model used was the Generalized Method of Moments (System-GMM) dynamic panel. Results show that these investments have no significant impact on CO2 emissions in higher-income countries, while for lower-income countries, an increase in both types of investment generates higher CO2 emissions. This corroborates the idea that, for less developed countries, the scale effect (increase in economic activity due to FDI) prevails. Moreover, the issues stemming from some types of investments in these countries results from pollution refuges and laxer environmental legislation.

KEYWORDS:
foreign direct investment; greenfield and brownfield investments; CO2 emissions