Rising environmental degradation and impact of foreign direct investment: An empirical evidence from SAARC region

Abstract

The Pollution Haven Hypothesis is amongst the latest discussion in economics that investigates the contribution of Foreign Direct Investment in raising environmental degradation in the host countries. Whereas, the concept of the Environmental Kuznets Curve hypothesis had been in economics since 1991 and is extensively studied under the umbrella of environmental degradation. Our present study is focused upon the role of economic growth, Foreign Direct Investment and energy consumption in increasing concentration of Carbon Dioxide in the South Asian region by using panel data from 1986 to 2014. The nascent techniques, panel ARDL, and FMOLS have been applied. The results thus obtained confirmed the existence of Pollution Heaven Hypotheses and Environmental Kuznets Curve in the short run. However, long-run analysis of the panel data confirms the absence of Pollution Heaven Hypotheses and existence of Environment Kuznets Curve. Furthermore, energy consumption in the region significantly contributing to environmental degradation. Since a major portion of the energy in South Asian countries is being generated from non-renewable energy resources. In the future, these countries are planning to meet their energy requirements through non-renewable energy resources that will inject more Carbon Dioxide to the atmosphere. The pattern of Study further refers to South Asian nations for extended co-operation in environmental R&D to mitigate future challenges. The governments in the region need to initiate environment-friendly regulations to suppress environmental degradation. Keen efforts are required by the statistical/environmental institutions in the region to set up a data collection/distribution forum so that real-time analysis be complied with, in order to accelerate the progress towards projected goals and sustainability.