Environmental Cost of Economic Development, Trade Openness, And FDI: Empirical Evidence from BRICS Economies
DOI:
https://doi.org/10.58622/e5qetp93Keywords:
Economic Development, Trade Openness, Foreign Direct Investment, Renewable Energy Consumption, CO2 Emission, BRICSAbstract
The balance between economic and ecological well-being has become one of the primary concerns of the governments in the world. The need to achieve sustainable growth is emphasized in the contemporary world economies and especially those that are underdeveloped. This paper investigates the dynamic impacts of the Foreign Direct Investment (FDI), economic growth (EG), the consumption of renewable energy (RE) and trade openness (TO) on the environmental degradation (CO2 emissions) in the BRICS countries (Brazil, Russia, India, China, South Africa). The analysis that will be conducted utilizes annual panel data covering the years 1995 to 2023 to implement the Panel Autoregressive Distributed Lag (ARDL) methodology to analyse the short and long-term correlation.
We are all paying the opportunity cost of economic development by accelerated environmental degradation all over the world. In order to curb the devastating realities of climate change and save nature, countries need to reshape their energy usage policies through renewable energy technologies and research, thus creating sustainable development in the world. The findings show that economic growth has a significant positive impact on the increase in CO2 emissions in the long-run and the use of renewable energy has significant positive impact on the reduction of the CO2 emissions in short and long-term. The effect of Foreign Direct Investment (FDI) is dynamic, increasing emissions over the short term and decreasing them significantly over time, therefore, supporting the Pollution Halo Hypothesis in the long term. The openness to trade showed a statistically significant yet insignificant positive impact on the long-term emissions. These findings bring about the need to develop renewable energy and wisely utilize foreign direct investment coupled with green growth strategies to reduce environmental degradation as well as develop the economy of the BRICS countries.
