Examination of the relationship with CO2 emission of foreign direct investments and renewable energy: An application on developed and developing countries

Globalization and liberalization in foreign trade brought the concept of foreign direct investment to the agenda and multinational companies invested in developing countries with cheap labor force to reduce their costs and shifted their capital to cross-border countries. Although foreign direct investment (FDI) contributes to the economic development of developing countries, its environmental effects are still debated. While the rapid increase in economic activities brings environmental problems; Similarly, problems occurring in the natural environment can adversely affect the economies of countries. The aim of this study is to collect empirical evidence on the extent to which FDIs affect carbon dioxide (CO2) emissions and renewable energy consumption, which are indicators of environmental pollution, in developed and developing countries. Between 1990-2018 in 48 developed and developing countries, Breusch, Pagan (1980) Section Dependency, Pesaran and Yamagata(2008) Homogeneity Test, Pesaran (2007) CADF Panel Unit Root, Westerlund(2007) Cointegration and Dumitrescu -Hurlin (2012) ) Analyzes were made using causality tests. According to the results obtained; FDI, renewable energy and CO2 emissions have the same long-term impact for all countries studied. However, one-way causality of FDI on CO2 emissions and renewable energy consumption was found to exist only in developing countries. Considering the results obtained, no causality relationship was found between the panels of developed countries in the analyzed countries. In developing countries, unidirectional causality was observed from FDI to CO2 and from FDI to RE. In the developed countries analyzed, the series act cointegrated, but no causality relationship was found between the series. Similarly, in developing countries, it has been found that the series act cointegrated, but differently, FDI is the cause of CO2 emissions and RE consumption in developing countries.