Foreign Direct Investment and CO<sub>2</sub> Emissions in Sub-Saharan Africa: A Heterogeneous Panel Causality Analysis

Mohamadou Oumarou; Mohammadou Nourou; Ibrahim; Votsoma Philemon

doi:doi:10.11648/j.ijeee.20240905.11

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Foreign Direct Investment and CO₂ Emissions in Sub-Saharan Africa: A Heterogeneous Panel Causality Analysis

Mohamadou Oumarou^*, Mohammadou Nourou

, Ibrahim, Votsoma Philemon

Published in International Journal of Economy, Energy and Environment (Volume 9, Issue 5)

Received: 20 August 2024 Accepted: 5 September 2024 Published: 23 September 2024

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Abstract

Following the density of the literature and the consensus in empirical studies, the aim of this article is to examine the nature of the relationship between foreign direct investment (FDI) and carbon dioxide (CO₂) emissions in sub-Saharan Africa (SSA). To this end, the methodological strategy employed is based not only on a theoretically sound multivariate framework, but also on recent developments in panel data econometrics, namely fully modified ordinary least squares (FMOLS) estimators, dynamic ordinary least squares (DOLS) estimators and the vector error correction model. In addition, the stationarity properties of the panel variables are examined, and the panel cointegration technique is used to test cointegrating relationships in the series of variables. The panel is composed of 38 SSA countries over the period 2000-2022. The main results show that in SSA: the variables move together in the long term. A 1% increase in inward FDI increases CO₂ emissions by 0.210%. This result suggests that FDI has flowed to SSA because of its weak environmental regulations, thus verifying the pollution haven hypothesis. In the long term, there is a bidirectional relationship between inward FDI and CO₂ emissions. In all the models used, renewable energy consumption reduces CO₂emissions. Therefore, SSA needs to put in place effective environmental rules to better guide FDI; put in place strategies to harness and add value to its energy sector, implement policies and strategies that ensure FDI attractiveness without abandoning the environment.

Published in	International Journal of Economy, Energy and Environment (Volume 9, Issue 5)
DOI	10.11648/j.ijeee.20240905.11
Page(s)	105-118
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2024. Published by Science Publishing Group

Keywords

Foreign Direct Investment, CO₂ Emissions, FMOLS, DOLS, Sub-Saharan Africa

References

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Oumarou, M., Nourou, M., Ibrahim, Philemon, V. (2024). Foreign Direct Investment and CO2 Emissions in Sub-Saharan Africa: A Heterogeneous Panel Causality Analysis. International Journal of Economy, Energy and Environment, 9(5), 105-118. https://doi.org/10.11648/j.ijeee.20240905.11

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ACS Style

Oumarou, M.; Nourou, M.; Ibrahim; Philemon, V. Foreign Direct Investment and CO2 Emissions in Sub-Saharan Africa: A Heterogeneous Panel Causality Analysis. Int. J. Econ. Energy Environ. 2024, 9(5), 105-118. doi: 10.11648/j.ijeee.20240905.11

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AMA Style

Oumarou M, Nourou M, Ibrahim, Philemon V. Foreign Direct Investment and CO2 Emissions in Sub-Saharan Africa: A Heterogeneous Panel Causality Analysis. Int J Econ Energy Environ. 2024;9(5):105-118. doi: 10.11648/j.ijeee.20240905.11

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@article{10.11648/j.ijeee.20240905.11,
  author = {Mohamadou Oumarou and Mohammadou Nourou and Ibrahim and Votsoma Philemon},
  title = {Foreign Direct Investment and CO2 Emissions in Sub-Saharan Africa: A Heterogeneous Panel Causality Analysis


},
  journal = {International Journal of Economy, Energy and Environment},
  volume = {9},
  number = {5},
  pages = {105-118},
  doi = {10.11648/j.ijeee.20240905.11},
  url = {https://doi.org/10.11648/j.ijeee.20240905.11},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijeee.20240905.11},
  abstract = {Following the density of the literature and the consensus in empirical studies, the aim of this article is to examine the nature of the relationship between foreign direct investment (FDI) and carbon dioxide (CO2) emissions in sub-Saharan Africa (SSA). To this end, the methodological strategy employed is based not only on a theoretically sound multivariate framework, but also on recent developments in panel data econometrics, namely fully modified ordinary least squares (FMOLS) estimators, dynamic ordinary least squares (DOLS) estimators and the vector error correction model. In addition, the stationarity properties of the panel variables are examined, and the panel cointegration technique is used to test cointegrating relationships in the series of variables. The panel is composed of 38 SSA countries over the period 2000-2022. The main results show that in SSA: the variables move together in the long term. A 1% increase in inward FDI increases CO2 emissions by 0.210%. This result suggests that FDI has flowed to SSA because of its weak environmental regulations, thus verifying the pollution haven hypothesis. In the long term, there is a bidirectional relationship between inward FDI and CO2 emissions. In all the models used, renewable energy consumption reduces CO2 emissions. Therefore, SSA needs to put in place effective environmental rules to better guide FDI; put in place strategies to harness and add value to its energy sector, implement policies and strategies that ensure FDI attractiveness without abandoning the environment.
},
 year = {2024}
}

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TY  - JOUR
T1  - Foreign Direct Investment and CO2 Emissions in Sub-Saharan Africa: A Heterogeneous Panel Causality Analysis



AU  - Mohamadou Oumarou
AU  - Mohammadou Nourou
AU  - Ibrahim
AU  - Votsoma Philemon
Y1  - 2024/09/23
PY  - 2024
N1  - https://doi.org/10.11648/j.ijeee.20240905.11
DO  - 10.11648/j.ijeee.20240905.11
T2  - International Journal of Economy, Energy and Environment
JF  - International Journal of Economy, Energy and Environment
JO  - International Journal of Economy, Energy and Environment
SP  - 105
EP  - 118
PB  - Science Publishing Group
SN  - 2575-5021
UR  - https://doi.org/10.11648/j.ijeee.20240905.11
AB  - Following the density of the literature and the consensus in empirical studies, the aim of this article is to examine the nature of the relationship between foreign direct investment (FDI) and carbon dioxide (CO2) emissions in sub-Saharan Africa (SSA). To this end, the methodological strategy employed is based not only on a theoretically sound multivariate framework, but also on recent developments in panel data econometrics, namely fully modified ordinary least squares (FMOLS) estimators, dynamic ordinary least squares (DOLS) estimators and the vector error correction model. In addition, the stationarity properties of the panel variables are examined, and the panel cointegration technique is used to test cointegrating relationships in the series of variables. The panel is composed of 38 SSA countries over the period 2000-2022. The main results show that in SSA: the variables move together in the long term. A 1% increase in inward FDI increases CO2 emissions by 0.210%. This result suggests that FDI has flowed to SSA because of its weak environmental regulations, thus verifying the pollution haven hypothesis. In the long term, there is a bidirectional relationship between inward FDI and CO2 emissions. In all the models used, renewable energy consumption reduces CO2 emissions. Therefore, SSA needs to put in place effective environmental rules to better guide FDI; put in place strategies to harness and add value to its energy sector, implement policies and strategies that ensure FDI attractiveness without abandoning the environment.

VL  - 9
IS  - 5
ER  -

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Mohamadou Oumarou

Department of Public Economics, Faculty of Economics and Management, University of Garoua, Garoua, Cameroon

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Mohammadou Nourou

Department of Quantitative Methods, Faculty of Economics and Management, University of Garoua, Garoua, Cameroon

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http://orcid.org/0000-0001-8440-6988
Ibrahim

Department of Public Economics, Faculty of Economics and Management, University of Garoua, Garoua, Cameroon
Votsoma Philemon

Banking and Monetary Economics Department, Faculty of Economics and Management, University of Garoua, Garoua, Cameroon

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APA Style

Oumarou, M., Nourou, M., Ibrahim, Philemon, V. (2024). Foreign Direct Investment and CO2 Emissions in Sub-Saharan Africa: A Heterogeneous Panel Causality Analysis. International Journal of Economy, Energy and Environment, 9(5), 105-118. https://doi.org/10.11648/j.ijeee.20240905.11

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ACS Style

Oumarou, M.; Nourou, M.; Ibrahim; Philemon, V. Foreign Direct Investment and CO2 Emissions in Sub-Saharan Africa: A Heterogeneous Panel Causality Analysis. Int. J. Econ. Energy Environ. 2024, 9(5), 105-118. doi: 10.11648/j.ijeee.20240905.11

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AMA Style

Oumarou M, Nourou M, Ibrahim, Philemon V. Foreign Direct Investment and CO2 Emissions in Sub-Saharan Africa: A Heterogeneous Panel Causality Analysis. Int J Econ Energy Environ. 2024;9(5):105-118. doi: 10.11648/j.ijeee.20240905.11

Copy | Download

@article{10.11648/j.ijeee.20240905.11,
  author = {Mohamadou Oumarou and Mohammadou Nourou and Ibrahim and Votsoma Philemon},
  title = {Foreign Direct Investment and CO2 Emissions in Sub-Saharan Africa: A Heterogeneous Panel Causality Analysis


},
  journal = {International Journal of Economy, Energy and Environment},
  volume = {9},
  number = {5},
  pages = {105-118},
  doi = {10.11648/j.ijeee.20240905.11},
  url = {https://doi.org/10.11648/j.ijeee.20240905.11},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijeee.20240905.11},
  abstract = {Following the density of the literature and the consensus in empirical studies, the aim of this article is to examine the nature of the relationship between foreign direct investment (FDI) and carbon dioxide (CO2) emissions in sub-Saharan Africa (SSA). To this end, the methodological strategy employed is based not only on a theoretically sound multivariate framework, but also on recent developments in panel data econometrics, namely fully modified ordinary least squares (FMOLS) estimators, dynamic ordinary least squares (DOLS) estimators and the vector error correction model. In addition, the stationarity properties of the panel variables are examined, and the panel cointegration technique is used to test cointegrating relationships in the series of variables. The panel is composed of 38 SSA countries over the period 2000-2022. The main results show that in SSA: the variables move together in the long term. A 1% increase in inward FDI increases CO2 emissions by 0.210%. This result suggests that FDI has flowed to SSA because of its weak environmental regulations, thus verifying the pollution haven hypothesis. In the long term, there is a bidirectional relationship between inward FDI and CO2 emissions. In all the models used, renewable energy consumption reduces CO2 emissions. Therefore, SSA needs to put in place effective environmental rules to better guide FDI; put in place strategies to harness and add value to its energy sector, implement policies and strategies that ensure FDI attractiveness without abandoning the environment.
},
 year = {2024}
}

Copy | Download

TY  - JOUR
T1  - Foreign Direct Investment and CO2 Emissions in Sub-Saharan Africa: A Heterogeneous Panel Causality Analysis



AU  - Mohamadou Oumarou
AU  - Mohammadou Nourou
AU  - Ibrahim
AU  - Votsoma Philemon
Y1  - 2024/09/23
PY  - 2024
N1  - https://doi.org/10.11648/j.ijeee.20240905.11
DO  - 10.11648/j.ijeee.20240905.11
T2  - International Journal of Economy, Energy and Environment
JF  - International Journal of Economy, Energy and Environment
JO  - International Journal of Economy, Energy and Environment
SP  - 105
EP  - 118
PB  - Science Publishing Group
SN  - 2575-5021
UR  - https://doi.org/10.11648/j.ijeee.20240905.11
AB  - Following the density of the literature and the consensus in empirical studies, the aim of this article is to examine the nature of the relationship between foreign direct investment (FDI) and carbon dioxide (CO2) emissions in sub-Saharan Africa (SSA). To this end, the methodological strategy employed is based not only on a theoretically sound multivariate framework, but also on recent developments in panel data econometrics, namely fully modified ordinary least squares (FMOLS) estimators, dynamic ordinary least squares (DOLS) estimators and the vector error correction model. In addition, the stationarity properties of the panel variables are examined, and the panel cointegration technique is used to test cointegrating relationships in the series of variables. The panel is composed of 38 SSA countries over the period 2000-2022. The main results show that in SSA: the variables move together in the long term. A 1% increase in inward FDI increases CO2 emissions by 0.210%. This result suggests that FDI has flowed to SSA because of its weak environmental regulations, thus verifying the pollution haven hypothesis. In the long term, there is a bidirectional relationship between inward FDI and CO2 emissions. In all the models used, renewable energy consumption reduces CO2 emissions. Therefore, SSA needs to put in place effective environmental rules to better guide FDI; put in place strategies to harness and add value to its energy sector, implement policies and strategies that ensure FDI attractiveness without abandoning the environment.

VL  - 9
IS  - 5
ER  -

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