Trade Openness, Domestic and Foreign Investments, and the Environment

This paper studies the impact of growth, and trade and investment openness on the environment at the regional level. We find support for the environmental Kuznet Curve hypothesis for CO2 emissions in Africa, Asia and OECD countries. We show that Foreign Direct Investment (FDI) has detrimental effects on CO2 emissions in Africa, the Middle East and North Africa, the former United Socialist Soviet Republic and Eastern Europe, and South America, but not in Asia where it seems to have beneficial effects. FDI raises SO2 emissions in South America, although it does lower them in Africa. Local investment is contributing significantly to both CO2 and SO2 emission increases in most regions while trade openness reduces (increases) CO2 in OECD countries (South America).