Pollution Halo Research Articles

Study on the Emission Reduction Effect of China's OFDI in Countries along the Belt and Road

With extreme weather events occurring more frequently around the world, urgent action on climate change is becoming increasingly urgent. In the countries along the "Belt and Road", many adopt extensive development methods and face increasing pressure on carbon emissions. This paper explores the impact of China's outward direct investment (OFDI) on carbon dioxide (CO2) emissions from 108 countries along the route that have joined China's Belt and Road Initiative, reported by Xinhua News Agency, from 2005 to 2020. The findings show that China's OFDI helps reduce carbon emissions in host countries, strongly refuting the claim that China's OFDI poses an environmental threat. At the same time, OFDI has promoted the spread of environmental protection technology and industrial upgrading in countries along the route, especially in developing countries, which may bring the phenomenon of "pollution halo". Based on the results of the study, it is suggested that China and countries along the "Belt and Road" should carry out international environmental technology exchanges and cooperation, and strengthen green and low-carbon investment in these countries. These cooperation measures will help push countries along the Belt and road towards a more sustainable development path and jointly address the challenge of global climate change.

Public Sector Corruption, FDI and Sustainable Development in Africa: Does the Pollution Halo or Haven Hypothesis hold in Ghana?

This paper examines the effects of corruption and FDI on sustainable development in Africa, particularly Ghana. The study observes the behaviour of firms using foreign direct investment to track MNEs' role in carbon emission. The study employs a quantitative approach with an ex-post facto research design type to inquiry using data from the World Bank, the Global Footprint Network and Transparency International from 1980 to 2023. The symmetric result discloses that corruption and FDI depress sustainability significantly in the long run. In the short run, it turns out that corruption and FDI stimulate sustainability. However, the short-run asymmetric effect shows that the positive and negative shocks of corruption and FDI exude negative effects on sustainability. This provides strong and consistent evidence of the pollution haven hypothesis of FDI in Ghana. Therefore, firms under the one-district, one-factory (1D1F) flagship policy and beyond must be encouraged to adhere to the strict carbon policy of the host country. The decision of the government to introduce an emission tax in the 2024 budget is tenable but the tax must be properly targeted to achieve the desired outcome.

Financial development and environmental quality: Does the financial environmental Kuznets Curve Prevail in Australia?

It is crucial to evaluate the link between financial development and environmental quality in order to meet the environmental sustainability goals. Therefore, this scholarly work seeks to validate the of an inverted U-shaped relationship between financial development and environmental quality in Australia, which modifies the conventional theory of the Environmental Kuznets Curve. For the purposes of empirical analysis, we utilized the Autoregressive Distributed Lag bound test over the period from 1980 to 2021 for empirical investigation. Our findings confirm the existence of a Financial Environmental Kuznets Curve (FEKC) in the long-run, while the short-run results do not support its establishment. This means that achieving a financial development level of 0.0458 could help attain the environmental wellbeing in Australia. Similarly, the estimation outcomes affirm that the conventional Environmental Kuznets Curve exists in the long-run but not in the short-run. Our results also indicate that energy usage negatively impacts environmental quality, while foreign direct investments support the pollution halo effect in the long-run but do not exhibit this effect in the short-run. The roles of urbanization and trade openness are positive in enhancing quality of environment in the short-run. However, the effect of the carbon tax on determining environmental quality in Australia is deemed insignificant. In conclusion, this study offers vital policy recommendations to help achieve the Australian government's commitment to climate change.

Impact of Foreign Direct Investment on Green Total Factor Productivity: New Evidence from Yangtze River Delta in China

China has entered a period of high-quality development. As an important feature of high-quality development, green total factor productivity (GTFP) has attracted much attention. With the opening-up and economic globalization, the Yangtze River Delta, one of the strongest and most technological regions in China, has been attracting an increasing amount of foreign direct investment (FDI). This study investigates if FDI is conducive to GTFP under the constraints of specific resources and a specific environment, which has important practical significance for the utilization of FDI in the Yangtze River Delta and China. Through a literature review and sorting the current FDI in the Yangtze River Delta, the GTFP and its decomposition indicators of 27 cities from 2004 to 2019 are calculated based on their energy consumption and pollution. Using the fixed-effects model and threshold model of panel data, this study tests whether FDI promotes GTFP and whether a nonlinear impact of FDI on GTFP exists. It finds that (1) the GTFP of most cities in the Yangtze River Delta improved during the sample period, but their annual growth declined. Technology is the dominant factor affecting the growth of GTFP. (2) FDI in the Yangtze River Delta has increased, and the investment structure has improved, but the distribution among cities is uneven. (3) The scale and quality of FDI have a positive impact on GTFP, which supports the “Pollution Halo” hypothesis. Economics, education, networks, and trade openness can promote the growth of GTFP, while environmental regulation, government intervention, and industrialization have a negative impact. (4) The quality of FDI, economics, the industrial structure, the environmental regulation, and the internet are each a significant single threshold characteristic for the impact of FDI on GTFP. When one of these factors is lower than a certain threshold, FDI has less impact on GTFP. When one exceeds a certain threshold, FDI’s positive promotion effect on GTFP significantly improves. Based on the analysis, this study offers some suggestions. The government should improve the FDI selection mechanism based on realities, make appropriate environmental regulatory policies, strengthen the construction of networks, and improve the “Internet+” effect on productivity.

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.

Pollution haven or pollution halo? Testing direct and spillover effects of FDI

FDI has direct effects (effects on foreign-invested firms) and spillover effects (effects on other firms) on pollution emissions. To split out these two effects, this paper divides firms into different clusters based on their industries and regions, then considers the interactions among firms in a cluster following the framework of Hudgens & Halloran (2008). We find that varying ratios of FDI firms within a cluster influence the magnitude of effects on firms' pollution emissions. Specifically, this paper finds inverted “U-shaped” direct effects of FDI on firms' pollution emissions. We also find “U-shaped” spillover effects and total effects: once the proportion of FDI firms within a cluster exceeds a specific threshold, we observe a decline in both spillover effects and total effects of FDI in mitigating pollution emissions.

IS CHINA REALLY A “POLLUTION HAVEN”: HOW FOREIGN DIRECT INVESTMENT SHAPE CARBON EMISSION IN CHINA? EVIDENCE FROM 265 CHINESE PREFECTURE-LEVEL CITIES

This paper explores the applicability of the well-known “Pollution Haven” hypothesis and “Pollution Halo” hypothesis at the city-level in contemporary China. The fixed effect model and the threshold effect model are employed to investigate the relationship between foreign direct investment (FDI) and carbon emission in 265 Chinese prefecture-level cites. Based on the entire sample, the results of fixed effect model support the applicability of “Pollution Haven” hypothesis, while the hypothesis is substantiated primarily in eastern and western China. In contrast, the central part of China does not conform to either hypothesis, suggesting that the emergence of a distinct “Pollution Haven Basin” within the country. Unlike the inverted “U-shaped” curve commonly posited in the existing literature, the threshold effect model unveils a “U-shaped” connection between FDI and carbon emission. Specifically, we find that the turning point is at around $52.93 million, which implies that FDI needs to surpass a certain threshold to actively drive carbon emission in the presence of a “Pollution Haven Engine”. Accordingly, in the context of more in-depth international trade and China’s carbon neutralization commitment, it would be wise for the Chinese local governments to control the FDI scale, and encourage FDI to tilt toward the clean sectors.

Divergence or convergence: trade globalization, regulatory and environmental quality in QUAD countries – a robust ARDL and decoupling index inquiry

PurposeThe Quadrilateral Group for Security Dialogues (QUAD), comprising Japan, Australia, India, and the USA, has experienced a noteworthy escalation in both environmental depletion and economic performance over the preceding 2 decades. Consequently, it becomes crucial to outline strategies through which the QUAD can attain a harmonious equilibrium between sustainable economic growth and ecological well-being. This research endeavors to dissect the intricate relationships among trade globalization, regulatory quality, and environmental sustainability within the QUAD for the period 1990–2021. The study checks for the Pollution Haven Hypothesis (PHH), and Pollution Halo Effect Hypothesis (PHEH).Design/methodology/approachThe long-run association is based on the autoregressive distributed lag (ARDL) model and bounds test approach to cointegration while divergence or convergence is studied with the help of decoupling index (DI). Results have been verified by applying serial correlation LM test, autoregressive conditional heteroskedasticity (ARCH), and cumulative sum of recursive residuals (CUSUM) tests to ensure the robustness and stability of the model.FindingsThe empirical results of this study affirm the applicability of the PHEH in the contexts of India, Japan, and the USA, whereas the PHH is validated in the case of Australia. Furthermore, the analysis reveals the existence of relative decoupling solely in the case of India. This testifies that the rate of growth of the Indian economy surpasses the rate of growth in ecological footprint (EF), indicating a relative reduction in the intensity of environmental impact per unit of economic growth.Research limitations/implicationsThe empirical findings of our study suggest that countries with effective regulatory systems are better positioned to control and mitigate the potential adverse environmental effects resulting from increased global trade. Thus, policymakers are prompted to reassess the development policies for sustainable economic growth that will minimize adverse environmental repercussions. The implication of the negative relation between urbanization and EF is paramount for policymakers in developing countries seeking strategies for balanced urban development that aligns with environmental sustainability.Originality/valueThe present study is a unique exploration of the impact of trade globalization and regulatory quality on EF, specifically on PHH/PHEH in the context of QUAD.

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

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

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.

Government environmental concern and urban green development efficiency: Structural and technological perspectives

Increased central government accountability regarding environmental issues is expected to prompt local governments to allocate more attention; however, will greater local government environmental concentration stimulate higher urban green productivity? We focus on answering this question and exploring the associated mechanisms. This study constructs a theoretical and analytical framework to examine the impact of government environmental concern (GEC) on urban green efficiency (UGE) and investigate the impact of GEC on UGE using a combination of fixed effects, threshold effects and spatial Durbin models. The findings reveal that GEC can significantly contribute to UGE and the conclusions remain robust following a series of tests. GEC can effectively promote UGE in eastern and low-pollution-emitting cities in contrast to mid-western and high-pollution-emitting cities. GEC also significantly contributes to industrial intelligence and green innovation, subsequently increasing UGE. Finally, we determine that GEC has a pollution halo effect in China. These findings provide empirical insights for local governments to effectively allocate resources to prioritised concerns.

Determining the environmental effect of Chinese FDI on the Belt and Road countries CO2 emissions: an EKC-based assessment in the context of pollution haven and halo hypotheses

This work aims to examines the effect of Chinese outward foreign direct investment (CoFDI), renewable energy, and energy intensity on CO2 emissions in 46 Belt and Road Initiative (BRI) nations divided into: Panel A, consisting of 16 European countries, and Panel B, comprising 30 Asian and MENA countries. This analysis used data from 2005 to 2018, applying second-generation econometric techniques. The empirical outcomes, obtained using Driscoll–Kraay methods, confirmed the pollution halo effect in Panel A, suggesting that FDI flows in these countries are environmentally friendly. In contrast, the results indicated a positive impact of CoFDI on CO2e in Panel B, supporting the pollution haven hypothesis that FDI may add to pollution. In addition, the study found an inverted-U-shaped association between per capita income and CO2e, validating the environmental Kuznets curve (EKC) hypothesis in both panels. The findings also revealed that energy intensity positively affects CO2e, whereas renewable energy has a significant negative effect in both panels, while the interaction terms of renewable and energy intensity are heterogenous in both panels. Based on these findings, the study recommends policy makers of these countries to attract clean FDI, particularly in renewable sectors, and shift from fossil fuel-based energy to renewable sources to control pollution by enacting energy-saving initiatives via lowering energy intensity.

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.

Pollution Haven or Pollution Halo: Evidence in Forestry in Developing Countries

Pollution Haven or Pollution Halo: Evidence in Forestry in Developing Countries

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.

Green outward foreign direct investment and host country environmental effects: The home country's carbon emission reduction system is crucial

Studies on the environmental impacts of outward foreign direct investment (OFDI) with less attention paid to the relationship between gradually increasing green investment and carbon emissions in the host countries. Based on the background of global carbon emission reduction, this study constructs a STIRPAT and difference-in-differences model to analyze the environmental effects of China's OFDI in ASEAN countries using unique enterprise-level data of China's OFDI from 2005 to 2020. The results show that the impact of Chinese OFDI on carbon emissions in ASEAN countries varies with the investment sector, the home country's enterprise ownership type, and environmental policy. China's green OFDI shows a clear “Pollution Halo” effect regarding investment sectors. However, the “Pollution Halo” effect of green OFDI by Chinese state-owned enterprises (SOEs) is more pronounced when considering the home country's enterprise ownership type. In addition, from the home country's environmental policy perspective, implementing China's domestic low-carbon pilot policy has a “Pollution Haven” effect on host countries. This study provides policy implications to promote the green transformation of Chinese OFDI and carbon emission reduction in ASEAN countries.