The Nexus between Foreign Direct Investment, Economic Progress, and Quality of Institutions in Fostering Sustainable Energy Efficiency: Evidence from BRICS Economies

Abstract

This paper analyzes the relationship between Foreign Direct Investment (FDI), economic growth, and institutional quality to maintain sustainable energy efficiency in BRICS. The objective of our study is to decompose which elements collectively impact the uptake of sustainable energy practices. A comprehensive dataset and an advanced econometric model Data Envelopment Analysis (DEA) are employed to investigate the dynamics at play. It has been done through comprehensive research to understand these FDI mechanisms driving the sustainable energy transition, bringing forth the fundamental role of strong institutions and sustained growth. In contrast to existing models, the analysis incorporates institutional quality, providing a fresh perspective on the impact of this factor on FDI and economic development in the BRICS economies. Findings show the crucial position FDI holds in developing sustainable energy and the institutional structure's effectiveness in accomplishing the current objectives. We have kept the position of economic growth, which serves as the essential driver for environmentally friendly use of energy resources. Our results have shown that FDI in sustainable energy is a requisite for economic growth improvement and the need for such progress to be supported by effective institutions to facilitate intra-regional investments.