This study examines the relationship between Foreign Direct Investment (FDI) and CO2 emissions in the Republic of Congo using a Vector Autoregression (VAR) model. The findings indicate that urban population growth is a significant driver of CO2 emissions, emphasizing the environmental impact of urbanization. While FDI exhibits a marginally significant positive effect on GDP, it shows no direct relationship with CO2 emissions or urban population. Variance decomposition analysis suggests that GDP plays a crucial role in attracting FDI, highlighting the potential for economic growth to enhance foreign investment inflows. Additionally, urban population growth significantly contributes to GDP expansion, underscoring the need for policies that align urbanization with economic productivity while mitigating environmental degradation. Although the short-term effects of FDI and GDP on CO2 emissions are minimal, the persistence of emissions necessitates the integration of environmental considerations into long-term economic and urban development strategies.
References
[1]
Saurav, A. and Sinha, A. (2020) Foreign Direct Investment and Employment Outcomes in Developing Countries: A Literature Review of the Effects of FDI on Job Creation and Wages. The World Bank Group.
[2]
Amighini, A.A., McMil-lan, M.S. and Sanfilippo, M. (2017) FDI and Capital Formation in Developing Economies: New Evidence from Industry-Level Data. National Bureau of Eco-nomic Research.
[3]
IPCC (2023) Climate Change 2023: Synthesis Report. Contribution of Working Groups I, II and III to the Sixth Assessment Report of the Intergovernmental Panel on Climate Change. IPCC, 35-115.
[4]
Satti, S.L., Farooq, A., Loganathan, N. and Shahbaz, M. (2014) Empirical Evidence on the Resource Curse Hypothesis in Oil Abundant Economy. Economic Modelling, 42, 421-429. https://doi.org/10.1016/j.econmod.2014.07.020
[5]
Lindsey, R. (2024) Climate Change: Atmospheric Carbon Dioxide. https://www.climate.gov/news-features/understanding-climate/climate-change-atmospheric-carbon-dioxide
[6]
Republic of Congo: Economy. https://globaledge.msu.edu/countries/republic-of-congo/economy
[7]
Pao, H. and Tsai, C. (2011) Multivariate Granger Causality between CO2 Emissions, Energy Consumption, FDI (Foreign Direct Investment) and GDP (Gross Domestic Product): Evidence from a Panel of BRIC (Brazil, Russian Federation, India, and China) Countries. Energy, 36, 685-693. https://doi.org/10.1016/j.energy.2010.09.041
[8]
Cole, M.A. and Elliott, R.J.R. (2005) FDI and the Capital Intensity of “Dirty” Sectors: A Missing Piece of the Pollution Haven Puzzle. Review of Development Economics, 9, 530-548. https://doi.org/10.1111/j.1467-9361.2005.00292.x
[9]
Zarsky, L., (1999) Havens, Halos and Spaghetti: Untangling the Evidence about Foreign Direct In-vestment and the Environment. Foreign Direct Investment and the Environ-ment, 13, 47-74.
[10]
Wang, W., Xu, T., Liu, X. and Sun, Y. (2023) FDI Inflows and Income Inequality: A Schumpeterian Economic Growth. International Re-view of Economics & Finance, 83, 805-820. https://doi.org/10.1016/j.iref.2022.10.023
[11]
Sattar, A., Tolassa, T.H., Hussain, M.N. and Ilyas, M. (2022) Environmental Effects of China’s Overseas Direct Investment in South Asia. Sage Open, 12, 1-21. https://doi.org/10.1177/21582440221078301
[12]
Lütkepohl, H. (2005) New Introduction to Multiple Time Series Analysis. Springer Science & Business Media.
[13]
Bank, A.D. (2022) Republic of Congo Economic Outlook. https://www.afdb.org/en/countries/central-africa/congo/congo-economic-outlook
[14]
Ackah, I. and Kizys, R. (2015) Green Growth in Oil Producing African Countries: A Panel Data Analysis of Renewable Energy Demand. Renewable and Sustainable Energy Reviews, 50, 1157-1166. https://doi.org/10.1016/j.rser.2015.05.030
