Do foreign direct investment inflows affect environmental degradation in BRICS nations?

Abstract

The acceleration in environmental degradation in the past few decades due to a spur in the emissions of greenhouse gases, massive deforestation and a loss of biodiversity has become a major concern of environmentalists, policy makers and researchers. Against this backdrop, the current paper empirically explores the impact of foreign direct investment inflows on environmental degradation. To do so, we have drawn a sample of BRICS nations because of its immense contribution to global environmental challenge. We collected the data since 1992 through 2014 and employed the panel cointegration techniques, and FMOLS and DOLS models. Our results confirm the significant role of foreign direct investment and gross domestic product in reducing the CO2 emissions in these nations. Our results do not support the theory of environmental Kuznets curve and the pollution haven hypothesis valid for these nations. Our findings recommend the use of cleaner technology, and promotion of FDI that ensures environmental awareness. Furthermore, appropriate policies on climate change and effective delegation of environmental protocols will be able to reduce the environmental degradation in BRICS nations.