This study examines how foreign direct investment (FDI), financial development (FD), and governance affect carbon emissions in 15 emerging Asian economies, revealing that FDI and FD increase emissions, while governance quality, especially in ecological governance, can moderate their environmental impact, though political governance often favors growth over sustainability.
Authors
Leena Ajit Kaushal, Management Development Institute, Gurgaon, India
Anurag Singh Chauhan, Management Development Institute, Gurgaon, India
Ashish Dwivedi, Professor, Jindal Global Business School, O.P. Jindal Global University, Sonipat, Haryana, India
Surajit Bag, Excelia Business School, CERIIM, 57 Av. du Président Wilson, 94230 Cachan, France
Summary
This study investigates the influence of foreign direct investment (FDI), financial development (FD), and governance on carbon emissions in 15 emerging Asian economies (EAEs) from 2000 to 2021. It aims to assess how successful these nations have been in upholding ecological sustainability while promoting themselves as alternative manufacturing destinations to China and fostering domestic manufacturing through significant financial development. It creates a composite governance quality (GQ) measure and three subdimensions—EcoGov, InstGov, and PolGov—to assess its precise role in influencing the FDI–carbon dioxide (CO2) and FD–CO2 nexuses.
Using fully modified ordinary least squares (FMOLS) and dynamic ordinary least squares (DOLS) panel cointegration techniques, this study yielded findings revealing that FDI and FD significantly enhance carbon emissions. The overall GQ significantly moderates the FD–CO2 nexus but fails to moderate FDI’s detrimental environmental influence. More specifically, EcoGov significantly moderates FDI’s and FD’s influence on carbon emissions, whereas InstGov significantly enhances their influence on emissions. In contrast, PolGov is only found to moderate FD’s impact on environmental quality since the Government frequently endorses liberal environmental regulations to facilitate FDI-led growth. The findings from this study are robust and carry distinct policy ramifications.
Published in: Journal of Environmental Management
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