The environmental Kuznets curve, based on the economic complexity, and the pollution haven hypothesis in PIIGS countries

Abstract

This study extends the debate on environmental performance in PIIGS countries by examining the dynamic association between economic complexity, foreign direct investment, renewable energy, urbanization process, and carbon emissions from1990–2019. The dynamic ordinary least square (DOLS) estimator is applied for empirical analysis. The empirical evidence reveals the association between economic complexity and CO2 emissions is inverted-U and further N-shaped relationship. This confirms the presence of environmental Kuznets curve (EKC) hypotheses in the region. The empirical results also authenticate the pollution haven hypothesis since high FDI is the culprit to increase environmental degradation in the PIIGS economies. The participation of renewable energy is found to inhibit CO2 emissions. Urbanization process exerts huge pressure on environmental quality. Finally, the findings of Dumitrescu-Hurlin causality test explores a bidirectional causal link between economic complexity and CO2 emissions. These findings advocate policymakers to propose comprehensive energy and economic policies by targeting cleaner production exercises, not only for environmental quality but also to accomplish the objectives of 17 sustainable development goals targets.