Research on supporting developing countries to achieve green development transition: Based on the perspective of renewable energy and foreign direct investment

Abstract

Transitioning to green development and decarbonizing the energy consumption structure is important for developing countries and global climate change governance. In developing countries, however, sustainable development is more difficult due to financial and technological constraints. This study was undertaken to investigate how foreign direct investment and renewable energy utilization can support developing countries in achieving green development, and to identify the complex relationships among internal and external influencing factors. A state-of-the-art data envelopment analysis method, coupled with the global non-radial directional distance function and a meta-frontier Malmquist index, measures the green total factor productivity and efficiency of 77 developing countries. A causal network that reflects both long-term and immediate relationships between green development performance and impact factors was constructed by embedding Geweke causal decomposition into Granger causality test. The study found that most developing countries are at the stage of high green levels and slow development, with the lack of green development potential serving as a hidden problem hindering their green development. The power and emission reduction technologies, economic agglomeration effect and industrial restructuring that foreign direct investment brings are contributing to green development achievements of developing countries, among which infrastructure construction, renewable energy investment, employment rate, and research and development investment are important transmission channels. With both long-term and immediate causalities to the economy, energy and industry of the host country, foreign direct investment is a key node of the causality network. In addition to helping developing countries achieve green development transition, this study provides information on the investment propensity and selectivity of investing countries.