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Natural resources-environment dilemma: The context of foreign direct investment and international trade

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  • Tang, Juan
  • Jiang, Yanyan

Abstract

The COP27 has given combat against climate change a new direction. The BRICS nations are scrutinizing a critical role in addressing the world's rising ecological degradation and climate change challenges. Nevertheless, the literature ignores the recently developing economies in favor of the industrialized ones. Henceforth, the research pursues to observe the link between natural resources and environmental sustainability by scrutinizing the effect of economic progress, FDI, trade, and renewable electricity in BRICS economies from 1990 to 2021. The research encompassed relevant panel methods such as CD and slope heterogeneity test for initial diagnostics, CIPS and Westerlund for panel unit root and cointegration, while panel ARDL and novel MMQR as primary methods to investigate the data. For robustness check, Robust and panel OLS and Pairwise Dumitrescu Hurlin test of causality are employed. The results suggest that countries have CD and Slope heterogeneity. Moreover, the data is static at the first difference and long-term equilibrium exists among variables. The observed results reveal that total natural resources have a curse on BRICS economies and are adversely related to environmental sustainability. Moreover, GDP is increasing CO2 emissions while trade is only increasing in the long term. A 1% increase reported in GDP, will increase CO2 emissions by 0.54% and 0.38% in the short and long run. Whereas increasing trade by 1% will increase CO2 emissions by 0.82% in the long run. However, The FDI outcomes are immaterial in the short and long run while significant in lower and upper quantiles with a coefficient of -0.12% on average across quantiles on CO2 emissions. Furthermore, renewable electricity output decreases carbon emissions in BRICS economies significantly with a coefficient of -0.225% on average across quantiles. The robust methods of the research provide similar and valid results. The causality test holds that GDP and FDI are bi-directional while the rest of the variables have an uni-directional relationship. Given the conclusions, the study provides relevant policy implications concerning environmental sustainability via steady economic expansion and the usage of NRR through the encouragement of FDI, Trade, and renewable electricity.

Suggested Citation

  • Tang, Juan & Jiang, Yanyan, 2024. "Natural resources-environment dilemma: The context of foreign direct investment and international trade," Resources Policy, Elsevier, vol. 89(C).
    • Handle: RePEc:eee:jrpoli:v:89:y:2024:i:c:s0301420723013089
    DOI: 10.1016/j.resourpol.2023.104597
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    References listed on IDEAS

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