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Foreign direct investment and environmental degradation: Can intellectual property rights help G20 countries achieve carbon neutrality?

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  • Viglioni, Marco Túlio Dinali
  • Calegario, Cristina Lelis Leal
  • Viglioni, Arthur Cesar Dinali
  • Bruhn, Nádia Campos Pereira

Abstract

The G20 comprises rich, industrialized, and powerful nations that advance the world economy through foreign direct investment (FDI). Nevertheless, these countries account for the largest share of global carbon dioxide emissions (CO2). Enforcing intellectual property rights (IPRs) has become a useful tool for stimulating clean technologies to mitigate climate change. This study examines how IPR enforcement moderated the inflow of FDI and carbon emissions in the G20 from 2001 to 2017. We applied the Driscoll-Kraay robust standard error technique, Fully Modified Ordinary Least Squares (FMOLS), Dynamic Ordinary Least Squares (DOLS), and Dumitrescu-Hurlin causality tests. The results show that FDI increases emissions, thus confirming the pollution haven effect. Long-term estimates suggest that the moderating role of IPRs in FDI significantly reduces environmental degradation. Causality analysis shows that FDI causes CO2 emissions in the long run, and carbon emissions enforce IPR regulations. Furthermore, we observed bidirectional causality between IPRs, FDI relationships, and carbon emissions. Based on these results, policymakers should enhance IPR policies and encourage clean technology through FDI among G20 members. In addition, governments should promote the clean-up of industrial processes, green finance, and the consumption of eco-friendly technologies, such as renewable energy, to achieve carbon neutrality.

Suggested Citation

  • Viglioni, Marco Túlio Dinali & Calegario, Cristina Lelis Leal & Viglioni, Arthur Cesar Dinali & Bruhn, Nádia Campos Pereira, 2024. "Foreign direct investment and environmental degradation: Can intellectual property rights help G20 countries achieve carbon neutrality?," Technology in Society, Elsevier, vol. 77(C).
    • Handle: RePEc:eee:teinso:v:77:y:2024:i:c:s0160791x24000496
    DOI: 10.1016/j.techsoc.2024.102501
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