The impact of transport energy consumption and foreign direct investment on CO2 emissions in ASEAN countries

Abstract

This study assesses the impact of foreign direct investment (FDI) and the energy consumption of the transport sector on CO2 emissions in five ASEAN (Association of Southeast Asian Nations) countries for the period 1980–2019. The study employs the environmental Kuznets curve (EKC), and uses a nonlinear autoregressive distributive lag model (NARDL) to analyze the data. The results suggest that carbon emissions and their determinants have a long-run equilibrium cointegrated relationship. Findings reveal that the EKC relation between income and CO2 emissions holds only for Singapore, whereas for Indonesia, Malaysia, the Philippines, and Thailand, income growth impacts CO2 emissions positively. Foreign direct investment and energy consumption in the transport sector also significantly impact CO2 emissions in the selected countries, except for Singapore. Transport energy consumption contributes more to CO2 emissions than FDI. Moreover, results suggest that FDI and energy consumption-led growth models are appropriate for ASEAN economies. The study recommends cautious growth policies, clean FDI inflows, and an emphasis on energy-efficient transport systems.