Foreign direct investment, energy transition and environmental degradation: evidence from Sub-Sahara African countries
DOI:
https://doi.org/10.18559/rielf.2024.1.1635Keywords:
climate change, driscoll and kraay, energy transition, foreign direct investment, renewable energy, Sub-Sahara AfricaAbstract
Purpose – The purpose of this study is to investigate the relationship between Foreign Direct Investment (FDI), energy transition, and environmental pollution in Sub-Saharan Africa spanning the period 1985 to 2020.
Design/methodology/approach – Divers econometrics approaches were used in order to have robust results. The cross-sectional dependency test was conducted and the results confirmed the presence of cross-sectional dependency among variables and this led to the usage of the second-generation unit root test. The analysis was conducted using the Driscoll and Kraay method, which helps address endogeneity, autocorrelation, and heteroscedasticity.
Findings – The results show that the pollution haven hypothesis is confirmed and that renewable energy usage which measures the energy transition diminishes environmental pollution. The coupled effect of foreign direct investment and renewable energy diminishes the environmental pollution. The population density increases environmental pollution. The same effect is also observed for trade and gross domestic product on environmental pollution.
Originality/value – This current study contributes to the existing literature through the analysis of the effect of foreign direct investment on the usage of renewable energy on environmental quality which is an essential element in the transition economics because there are several studies conducted to establish either the relationship between foreign direct investment and environmental pollution or renewable energy usage and environmental pollution but this study beyond this aspect will help knowing how both foreign direct investment and renewable energy affect environmental quality for policy recommendation. We then suggest from these results that more efforts should be made in order to increase the rate of foreign Direct Investment in Sub-Sahara African Countries, particularly the attraction of green technologies which can help produce more renewable energies.
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