Pollution Halo Hypothesis Research Articles

Empirical Evaluation of The Pollution Haven Hypothesis for Seven Largest Emerging Economies within The Framework of The New Global Climate Agreements

This study aims to determine whether the Pollution Haven Hypothesis (PHavenH), which suggests the negative impact of the FDI on environmental quality (EQ), is valid in seven selected emerging market economies for the period 1990-2020. To achieve this goal, the CO2 emission (CE) model includes renewable energy consumption (REC) in addition to the FDI variable. The elasticity coefficients of the model, in which cross-sectional dependence (CSD) and slope heterogeneity were determined, were estimated by the AMG method. The study found that FDI and REC positively influenced the EQ of the countries examined. The Dumitrescu-Hurlin (D-H) test results indicated a bidirectional causality relationship between FDI and CE. Additionally, a unidirectional causality was observed from REC to CE. These results suggest that both FDI and REC play a role in improving EQ. The results of the analysis show that the PHavenH, which expresses the view that FDI in the relevant countries causes environmental degradation (ED) in developing countries, is not valid. In other words, it confirms the Pollution Halo Hypothesis (PHaloH), which points to the finding that FDI improves EQ in the countries concerned. In this context, it has been concluded that REC has an important contribution to determining the validity of this hypothesis. The findings of the study suggest that it is essential to formulate policy recommendations aimed at boosting the production and utilization of renewable energy in the seven emerging market economies under investigation. Such initiatives can help enhance environmental sustainability and contribute to a cleaner and greener future for these countries.

The conundrum of porter hypothesis, pollution haven hypothesis, and pollution halo hypothesis: evidence from the Indian manufacturing sector

The conundrum of porter hypothesis, pollution haven hypothesis, and pollution halo hypothesis: evidence from the Indian manufacturing sector

The role of renewable energy and foreign direct investment toward environmental degradation convergence to achieve sustainability: evidence from ASEAN countries

PurposeThis study aims to analyze the convergence of environmental degradation clubs in the Association of Southeast Asian Nations (ASEAN). In addition, this study also analyzes the influence of renewable energy and foreign direct investment (FDI) on each club as an intervention to change the convergence pattern in each club.Design/methodology/approachThis study analyzes the club convergence of environmental degradation in an effort to find out the distribution of environmental degradation reduction policies. This study uses club convergence with the Phillips and Sul (PS) convergence methodology because it considers multiple steady-states and is robust. This study uses annual panel data from 1998 to 2020 and ASEAN country units with ecological footprints as proxies for environmental degradation. After obtaining the club results, the analysis continued by analyzing the impact of renewable energy and FDI on each club using panel data regression and the Stochastic Impacts by Regression on Population, Affluence and Technology model specification.FindingsBased on club convergence, ASEAN countries can be grouped into three clubs with two divergent countries. Club 1 has an increasing pattern of environmental degradation, while Club 2 and Club 3 show no increase. Club 1 can primarily apply renewable energy to reduce environmental degradation, while Club 2 requires more FDI. The authors expect policymakers to take into account the clubs established to formulate collaborative policies among countries. The result that FDI reduces environmental degradation in this study is in line with the pollution halo hypothesis. This study also found that population has a significant effect on environmental degradation, so policies to regulate population need to be considered. On the other hand, increasing income has no effect on reducing environmental degradation. Therefore, the use of renewable energy and FDI toward green investment is expected to intensify within ASEAN countries to reduce environmental degradation.Originality/valueThis research is by far the first to apply PS Club convergence to environmental degradation in ASEAN. In addition, this study is also the first to analyze the influence of renewable energy and FDI on each club formed, considering the need for renewable energy use that has not been maximized in ASEAN.

The Nexus Between Renewable Energy Consumption, Financial Development, and Trade Openness Based on Environmental Quality in Uganda: An Application of the ARDL

Environmental degradation is attributed to human activities associated with economic development. This study examines renewable energy consumption (REC), financial development (FD), trade openness, and environmental quality nexus in Uganda over the period 1990-2019 using the Autoregressive Distribution Lag (ARDL). Findings show that REC improves environmental quality both in the short and long run. In addition, while trade openness is negatively related to environmental quality in the short and long run, a negative correlation exists between FD and environmental quality only in the long run. Furthermore, economic growth has a positive relationship with environmental quality in the short run while in the long run, GDP2 improves environmental quality. However, the results from the study find no statistical relationship between FDI and environmental quality, and thus neither the pollution haven nor pollution halo hypotheses are confirmed in the Ugandan case. This paper does not only recommend investing more in renewable energy development to improve the quality of the environment but also in financial sector development to support investments that promote a low-carbon and green economy.

Effect of foreign direct investment on firms' pollution intensity: evidence from a natural experiment in China

Abstract This paper examines a causal relationship between foreign direct investment (FDI) and firms' pollution intensity by exploiting the policy of China's FDI access relaxation in 2002. The result shows that FDI leads to a significant reduction in firms' pollution intensity. The mechanism tests find that FDI reduces pollution intensity by increasing firms' productivity, pollution management abilities, and the output of lightly polluting firms. The effect primarily acts on firms in lightly polluting industries and firms in the eastern region. The findings support the pollution halo hypothesis and provide implications for developing countries like China by evaluating the effectiveness of policies to attract FDI.

Testing the validity of pollution haven and pollution halo hypotheses in BRICMT countries by Fourier Bootstrap AARDL method and Fourier Bootstrap Toda-Yamamoto causality approach

Testing the validity of pollution haven and pollution halo hypotheses in BRICMT countries by Fourier Bootstrap AARDL method and Fourier Bootstrap Toda-Yamamoto causality approach

Environmental implications of technology-driven energy deficit and urbanization: Insights from the environmental Kuznets and pollution hypothesis

The Belt and Road Initiative (BRI) intends to promote economic development in many developing countries and improve regional connectivity. Concerns about the BRI economies' environmental effects, particularly concerning carbon emissions (CO2E), have arisen due to their rapid economic progress. The current study examines the relationship between technology-driven energy deficits, urbanization, and CO2E in the 48 BRI economies. Using the Sys-GMM dynamic technique with balanced panel data from 2001 to 2020 reveals that technology-driven energy deficits positively impact CO2E, while urbanization negatively impacts CO2E. Renewable energy sources have a mitigating effect on CO2E. This current research supports the EKC of growth and the Pollution Halo Hypothesis of FDI but not the Pollution Haven Hypothesis. The findings suggest that strategies to reduce carbon emissions should prioritize urban development and adopt technology-driven energy sources.

Using bootstrap fourier granger causality test in quantiles to re-examine Pollution Haven/Halo hypotheses in China and G3 countries

We re-examine the Pollution Haven and Pollution Halo hypotheses (PHEH and PHALH) using a quantile-based Bootstrap Fourier Granger causality test, a method adept at identifying non-linear structural breaks. Our study encompasses data from China and the G3 countries (Japan, the UK, and the USA) spanning the period from 1980 to 2020. Our empirical findings reveal that data from the USA corroborates the PHEH, suggesting a trend where increased foreign direct investment (FDI) aligns with higher environmental degradation. In contrast, data from China affirms the PHALH, indicating that FDI contributes to improved environmental standards. However, data from Japan and the UK do not conclusively support either hypothesis. These results have significant implications for governmental policy formulation in China and the G3 countries, particularly in shaping FDI policies that align with environmental sustainability goals.

High-income developing countries as pollution havens: Can financial development and environmental regulations make a difference?

The argument that foreign direct investments inflows in developing countries harm the environmental quality of these countries is evaluated within the scope of Pollution Haven Hypothesis. However, the Pollution Halo Hypothesis, the counterargument, contends that foreign investment has several positive effects on the environmental circumstances in the host nation. Therefore, firstly the unit root properties of variables and cointegration existence among variables are checked with newly developed panel data techniques that both allows cross-sectional dependence and structural breaks. In addition, using recently established CS-ARDL technique for high-income developing nations (BRICS-T), this research examines the effects of foreign direct investment on the environment as well as whether environmental regulations and financial development have changed the potential haven hypothesis into the halo hypothesis for the period from 1995 to 2020. The pollution haven theory holds true for these nations, according to the results of empirical research. On the other side, it is determined that tighter environmental restrictions support the environmental quality, and the usage of renewable energy also improves environmental quality, even if economic growth harms environmental quality. In addition, it is found that both regulations and financial development has a moderating role on reversing the haven to halo.

The era of global warming mitigation: The role of financial inclusion, globalization and governance institutions

Several efforts have been undertaken by environmentalists, nations, and various international organizations towards the fight against carbon emissions. The continuity of the environment has been one of the main concerns of the international system and state and non-state actors and government institutions are encouraged to play their roles effectively. Therefore, the study assesses the effect of financial inclusion, globalization, and government institutions on carbon emissions. The study used data from 1996 to 2021 and employed FMOLS model for the analysis. The findings of the study confirm the pollution halo hypothesis implying globalization promotes environmental sustainability. However, financial inclusion and government institutions have no significant effect on global warming mitigation. Nevertheless, institutional governance encourages global warming while political stability promotes the fight against global warming, the effect of economic governance is not significant. Renewable energy and economic growth exhibit positive and negative effect, respectively, on environmental sustainability. The findings suggest the encouragement of the rule of law, political stability, and an effective low carbon trading system as part of the policy implications.

Nexus between foreign direct investment and ecological footprint in BRICS and Next-11: the moderating role of green innovation

PurposeThe study examines the presence of the pollution haven or pollution halo hypothesis in Brazil, Russia, India, China and South Africa (BRICS) and Next-11 economies. Hence, it empirically tests the direct impact of foreign direct investment (FDI) on the ecological footprint. Further, it explores the moderating role of green innovation on the nexus between FDI and ecological footprint.Design/methodology/approachThe study uses the Driscoll–Kraay (DK) standard error panel regression technique to examine the long-run elasticities amongst the variables for the group of emerging countries, BRICS and Next-11, during the period of 1992 to 2018. Further, statistical robustness is demonstrated using the fully modified ordinary least squares technique.FindingsThe empirical finding shows that FDI degrades environmental quality by raising the ecological footprint. Thus, it proves that FDI is a source of pollution haven in BRICS and Next-11 countries. However, green innovation negatively moderates the relationship between FDI and ecological footprint. That means the joint impact of green innovation, and FDI proves the presence of the pollution halo hypothesis. Further, renewable energy consumption is reducing the ecological footprint, but economic growth and industrialisation are worsening the environmental quality.Practical implicationsThis study offers policy implications for governments and policymakers to promote environmental sustainability by improving green innovation and allowing FDI that encourages clean and advanced technology.Originality/valueNo prior studies examine the moderating role of green innovation on the relationship between FDI and ecological footprint in the context of emerging countries.

Environmental impact of foreign direct investment in Turkey: does the quality of institutions matter? Evidence from time series analysis using the Fourier extension.

Since the 1980s, Turkey has experienced a significant increase in both foreign direct investment (FDI) and its ecological footprint (EFP). While FDI is widely acknowledged as a pivotal driver of economic growth, its impact on environmental degradation is multifaceted and debated. Moreover, a country's institutional framework plays a key role in shaping this relationship. Yet, the influence of institutional structures on the FDI-environment nexus is often neglected in current literature. In this study, we investigate the environmental implications of FDI in Turkey from 1984 to 2018, employing time series analysis with a Fourier extension and accounting for institutional quality. Fourier function models give more effective results in modeling structural breaks. We first use Fourier techniques to assess the unit root and cointegration relationship. Upon establishing cointegration, we employ the DOLS estimator, extended with Fourier terms, to determine the long-term coefficients. We then assess the causal relationship between the variables using the Fourier causality test. Our findings indicate that while FDI exacerbates environmental degradation (supporting the pollution haven hypothesis), the interaction term of FDI-institutional quality mitigates this degradation (supporting the pollution halo hypothesis). Given these empirical findings, this study suggests that strengthening Turkey's institutional quality has the potential to amplify the environmental advantages of FDI, alongside its economic benefits.

Mechanism of smart city policy on the carbon emissions of construction enterprises in the Yangtze River Economic Belt: a perspective of the PESTEL model and the pollution halo hypothesis

Most of the current studies on carbon emission reduction have been focusing on the urban and industrial levels, overlooking policy assessment studies on the carbon emissions of construction enterprises in the Yangtze River Economic Belt (YREB). To explore the impact of smart city policy (SCP) on the carbon emissions of construction enterprises, this paper constructs a theoretical framework model for evaluating SCP based on the Political-Economic-Sociocultural-Technological-Environmental-Legal (PESTEL) model and the perspective of the pollution halo hypothesis. In addition, this paper adopts panel data of 110 cities covered by the YREB from 2004 to 2021 and verifies the SCP impact mechanism on the carbon emissions of construction enterprises in the YREB through the difference-in-differences (DID) method, the propensity score matching (PSM) method, and the analysis of mediating effects and moderating effects. The conclusions are as follows: (1) the SCP significantly curbs the carbon emissions of the construction enterprises in the YREB pilot cities; (2) the SCP has a regional qualitative effect on the carbon emissions of the construction enterprises in the YREB and it curbs the carbon emissions of the construction enterprises in the upstream and downstream regions; (3) R&D and FDI are important transmission mechanisms; and (4) new urbanization construction has a positive moderating effect on the carbon emission reduction effect of the SCP on construction enterprises. As a research precedence, this paper reveals for the first time the mechanism of the SCP on the carbon emissions of construction enterprises in the YREB through the lens of the PESTEL model and the pollution halo hypothesis; the paper not only enriches the research related to urban policies but also provides new evidence from Chinese construction enterprises for assessing the impacts of pilot cities.

Attaining environmental sustainability amidst the interacting forces of natural resource rent and foreign direct investment: Is Norway any different?

AbstractThis is a study of Norway's sustainable environment development amidst the interactions of natural resources, external investment (FDI) and economic development. Much has been done with respect to the study of Norway's economic performance in relation to the link between the natural resources and FDI with little emphasis on the environmental performance of the resource‐based economy. Also, Norway is classified as among the top countries in Europe with a greater percentage of adopting renewable energy, and no study has done a critical review of the impact of natural resources and FDI which are part of drivers of carbon emission that can counter the positive impact of renewable energy towards the Norway's sustainable environment. On this basis, this study adopts a time series data of Norway, 1970 to 2018 to study its environmental performance. Approaches such as structural break analysis, Autoregressive Distributed Lag (ARDL)‐bound testing and Granger causality estimations are utilised in this study for in‐depth analysis of the subject. Findings from ARDL confirmed a positive association between fuels and carbon emission, other indicators (economic growth and natural resources) are improving the quality of the country's environment. FDI even though shows positive sign remains insignificant in impacting the environmental performance in the short run reverted to a significant negative relationship with carbon emissions. This confirms the pollution halo hypothesis and rejects the pollution haven hypothesis (PHH) for Norway, and this trend can be sustained with the constant implementation of environmental rules in the country. Granger test confirms, a one‐way transition from fossil fuels to carbon emission, from carbon emission to growth, and from economic growth to fossil fuels. Also, a two‐way transmission is found between fossil fuels and FDI. These findings from Granger causality are consistent with the findings from ARDL, hence, two ways interactions between FDI and fossil fuel energy source consumption from Granger causality and the two variables (fossil fuels and FDI) are seen impacting on Norway's environmental performance. Findings from the estimates suggest that natural resources and FDI are mitigating pollution, hence, Norway's policy is expected to be resources and FDI driven in sustainable environment development.

Pollution haven or pollution halo? The role of global value chains in Belt and Road economies

Abstract“Global value chains” (GVCs) participation brings countless economic and environmental benefits to “Belt and Road Initiative” (BRI) economies. As the nations associated with BRI are crucial members of GVCs, analyzing the influence of GVCs on environmental quality in BRI economies is of great significance. By joining regression models with “multi‐region input–output” analyses, current study inspects the influence of GVCs on environmental quality in 82 BRI economies from 2002 to 2018. This study considered different GVCs participation modes and national heterogeneity to check “pollution haven hypothesis and pollution halo hypothesis” theories. The GVC position worsened environmental quality in the full BRI panel and validated the pollution haven hypothesis theory. Forward and backward participation improves environmental quality and confirms the pollution halo hypothesis. Moreover, income‐specific outcomes showed divergent patterns related to GVCs and environmental quality. GVCs' position of GVCs promotes the environmental quality of developed and emerging countries and exacerbates that of developing and underdeveloped economies. Moreover, the links of forward and backward participation with environmental quality showed mixed results for the pollution haven and halo theories in all subpanels. The results propose that the BRI should focus on upgrading GVCs and adopting region‐specific green policies to ensure a sustainable environment.

A new look at the pollution halo hypothesis: The role of environmental policy stringency

A new look at the pollution halo hypothesis: The role of environmental policy stringency

The environmental cost of FDI and spatial implications of CO2 emissions in Sub-Saharan Africa.

This study endeavors to investigate the environmental cost of FDI inflows in the Sub-Saharan African (SSA) region over the period of 2006 to 2020. There are two opposing theories about how FDI impacts the environment, namely, the pollution halo hypothesis (PHH) and the pollution haven hypothesis (PH). Given the SSA region's poor environmental performance and potential spatial spillover effects on neighboring nations, the study underlines the necessity to look into the pollution hypotheses in theregion. The examination is carried out through non-spatial and spatial panel data econometric approaches. The empirical findings provide evidence that an increase in FDI inflow by 1% in SSA is positively associated with increasing levels of CO2 emissions by 0.03% on average, thus validating the notion of a pollution haven in the region. Furthermore, the study reveals that the environmental spillovers of CO2 emissions are not confined to the host country alone, but also extend to neighboring nations. Other key determinants of CO2 emissions, including GDP, population, and urbanization, were also found to be positively linked to CO2 emissions, whereas the use of renewable energy resources was found to have a mitigating effect. The empirical findings offer valuable insights for policymakers and stakeholders in the SSA region. These insights highlight the importance of the adoption of renewable energy sources and enacting regulatory measures to monitor the environmental cost of FDI, with the aim of mitigating the deleterious consequences of CO2 emissions, not only in the host nation but also in the neighboring nations.

Reconsidering the environmental Kuznets curve, pollution haven, and pollution halo hypotheses with carbon efficiency in China: A dynamic ARDL simulations approach.

Given a new perspective on the environmental hypothesis, this paper systematically investigates the validity of the environmental Kuznets curve (EKC), pollution haven, and pollution halo hypotheses using carbon efficiency as the dependent variable. Applying the dynamic autoregressive distributed lag simulations based on the annual time series data over the period 1990-2019, the study found that real GDP per capita has negative effects on China's environmental quality both in the short and long run, whereas the square of real GDP per capita has positive impacts. This validates the EKC hypothesis for China. Furthermore, foreign direct investment has negative effects on environmental quality in China, implying that the case of China exemplifies the pollution haven hypothesis and not the pollution halo hypothesis. The empirical results also demonstrate that energy efficiency and trade openness improve China's environmental quality both in the short run and long run. These findings, therefore, provide insights into achieving the ambitious climate goals in China by 2050.

The impact of globalization on comprehensive environmental efficiency and its sub‐stage efficiencies: An adjusted range adjusted measure network data envelopment analysis model approach

AbstractGlobalization is a worldwide trend, and environmental governance requires global cooperation. There are environmental issues caused by globalization, such as “environmental justice” and “externalization of cost.” However, several key questions remain about the impact of globalization on the environment. This article attempts to decompose the comprehensive environmental efficiency and analyze their inner relationship its determinants. This study adopts range adjusted measure network data envelopment analysis (DEA) model to measure the overall efficiency and decompose comprehensive efficiency into two stages and investigate the interrelationship among them, based on the data from 30 cities along the Yangtze River. This can reveal the “black box” of the DEA and the interrelationship between each stage. The panel quantile method is adopted to analyze the impact of influencing factors, especially globalization, on efficiency. This article creatively builds the in‐depth openness index to measure the tendency of in‐depth openness. The following findings are identified: (1) Among sub‐stages, environmental governance efficiency plays a more significant role in comprehensive environmental efficiency. (2) Foreign direct investment, urbanization, and industrial structure negatively influence efficiency, while the degree of openness, per capita GDP, and population density are positive determinants. (3) With the decrease of the HUANG index, the impact of globalization on the local environment shifted from supporting the pollution halo hypothesis toward supporting the pollution haven hypothesis. (4) Sustainability with harmony between humans and nature is recommended and can be achieved. The result of this study can help policymakers to find an effective way to achieve sustainability and improve the environmental efficiency effectively.

Foreign direct investment, environmental regulation and urban green development efficiency—An empirical study from China

ABSTRACT This study investigates the existence of the pollution halo hypothesis in China. To realize the goals, an urban green development efficiency measuring framework was established applying SBM directional distance function and Malmquist-Luenberger index. Using linear panel model and nonlinear panel model and data of 284 cities in China from 2008 to 2019, we have found that the pollution halo hypothesis does exist in China because FDI increases urban green development efficiency. The mechanism analysis of introducing environmental regulation indicates that the impact of FDI on urban green development efficiency presents a ‘U-shaped’ feature. The implementation of strict environmental regulation can significantly increase the positive impact of FDI on the urban green development efficiency. In addition, the analysis of regional heterogeneity has shown that when the environmental regulation intensity exceeds the turning point, FDI in eastern and central China plays a significant positive role in urban green development efficiency, while that in western China is inhibitory effect. Our empirical results have suggested the Chinese government should further utilize the positive role of FDI in urban green development, including gradually and orderly implementing strict environmental protection regulatory policies, and implementing green energy conservation transformation projects for energy intensive industries.