Does climate finance and foreign capital inflows drive de-carbonisation in developing economies?

Sustainable development requires high investment, and developing economies need external aid to afford it. Developed economies are committed to providing financial support to fight climate change to those with fewer resources suffering the severest consequences. Climate finance consists of financial activities focusing on mitigating and adapting to climate change effects. In this paper, two critical perspectives were addressed: the role of climate finance on environmental degradation and human development and climate finance determinants. This research compiled a panel covering 36 developing economies from 2001 to 2019. Panel-corrected Standard Errors and Feasible Generalized Least Squares estimators were applied. The Seemingly Unrelated Regressions method was carried out to provide robustness of the empirical findings. The empirical results show that climate finance contributes to environmental degradation mitigation, and this effect is more notable in lower-middle-income countries. In these countries, regulatory quality contributes to environmental quality. Moreover, climate finance and human development have a positive bilateral relationship. However, the results suggest that foreign capital inflow slows down human development. These findings provide useful information for policymakers to design and implement environmental policies and strategies to maximize the allocation of climate finance funds and thus help to improve environmental quality.

The evolution of the environmental Kuznets curve hypothesis assessment: A literature review under a critical analysis perspective.

Environmental changes based on factors like urbanization, population, economic growth, increase in energy consumption, and agricultural intensification are never far from the top of any agenda. The topics of environmental degradation and climate change cannot be confined to a single country or region but need to be addressed on a global scale. If the focus is on the relationship between environmental degradation and economic growth, then one hypothesis that is comprehensively used as an empirically model is the widely known Environmental Kuznets Curve. A substantial amount of research has been published about the Environmental Kuznets Curve, and this present study provides a detailed and extensive literature review of more than 200 articles from 1998 to 2022 to explain and assess its evolution. This literature review provides in detail the Environmental Kuznets Curve relationship under analysis, the additional variables included, the type of analysis and methods performed, the relationships obtained, and if the turning point is calculated. Furthermore, this comprehensive literature points out critical issues and gaps in the Environmental Kuznets Curve analysis. It is important to note that there are components that are not considered in the Environmental Kuznets Curve analysis. The Environmental Kuznets Curve only focuses on production and overlooks the impact of the consumption of imported goods on the environment. Consequently, environmental improvements from technological progress will be offset, and economic growth will result in more environmental degradation. This goes against the change in consumer behaviour which occurs with a rise in income, which is one basic assumption of the Environmental Kuznets Curve. The relocation of pollutant industries and consequent relocation of emissions could distort the emissions trajectory over the economic growth path and is also not considered in the Environmental Kuznets Curve analysis. On the other hand, the growth path traced by the inverted U-shaped is not efficient, and the environmental damage provoked in the first phases of the EKC might not be repairable. Therefore, technological progress, climate finance, and energy transition could improve the Environmental Kuznets Curve assessment.

The cost of healthier and more sustainable food choices: Do plant-based consumers spend more on food?

Plant-based diets are often promoted as healthier and more sustainable and thus as a mechanism to achieve the targets proposed to mitigate climate change and noncommunicable diseases. However, plant-based diets can be perceived as more expensive than the common omnivorous diets, when considering the expensive novel meat substitutes and also the higher costs of fruits and vegetables, whose consumption is perceived to increase. Therefore, the present study assesses the question: Do plant-based consumers spend more on food compared to omnivorous consumers? Based on primary data (n = 1040) collected through an online survey, representative of the Portuguese population, through logistic regressions, it was possible to conclude that plant-based consumers, particularly vegan, are associated with lower food expenditures compared to omnivorous consumers. In fact, plant-based consumers are shown to spend less than all other consumers assessed. Food policies aligning healthiness and sustainability with affordability can deliver a major boost for the promotion of plant-based diets and help achieve the mitigation targets proposed.

A sectoral analysis of the role of Foreign Direct Investment in pollution and energy transition in OECD countries.

The sustainable development agenda has been driving the global debate on environmental policy for several years now. Developed countries have stricter environmental controls and are under pressure from international agencies to cut pollution. However, many of these countries have been accused of using Foreign Direct Investment to shift their environmental burden to countries with lower environmental restrictions, rather than reducing their overall environmental impact. Should developed countries continue to transfer their emissions? What role does the energy structure of recipient countries play in this investment? A Panel Autoregressive Distributed Lag Model was carried out for a set of 15 OECD countries, from 2005 to 2018. The main findings upheld the Pollution Halo hypothesis. However, they also confirmed the Pollution Haven hypothesis, which was unexpected for developed countries, with their higher environmental standards. It seems that Foreign Direct Investment may increase pollution by increasing overall energy consumption, rather than by transferring polluting industries. Foreign Direct Investment inflows seem to be more environmentally friendly than inward stock, particularly in the electricity and services sectors. Energy transition could be achieved without the polluting effect of Foreign Direct Investment. Investment in the electricity sector may be a way of decoupling economic growth from pollution.

Is the Relocation of Polluting Industries Prompted by FDI Flow and Stock, Globalisation, Corruption and Regulation?

Can globalisation and foreign direct investment shape sustainable development? Foreign direct investment is one of the main drivers for the transfer of polluting industries. With this in mind, the main objective of this research is to identify the role played by foreign direct investment (flow and stock), globalisation (de jure and de facto), corruption and regulatory quality in environmental degradation and sustainable development. To accomplish this objective, and to link the relationships under analysis to the level of development, a comparison between a group of developing countries and a group of developed ones was performed. The results confirm the suitability of the division of the countries by revealing various effects. This analysis was conducted from 1996 to 2017 and by recurring to the Autoregressive Distributed Lag model. This study proves that foreign investors play a vital role in reaching sustainable development. Measures must be implemented to eliminate the distortions that cause a company based in a country with strict environmental regulations to relocate its production to one with lax environmental regulations. However, these measures need to be combined with complementary measures that encourage developing economies to agree to a possible slowdown in their economic growth if sufficiently compensated for this reduced growth.

The driving forces of energy-related carbon dioxide emissions from South Latin American countries and their impacts on these countries' process of decoupling.

An extensive decomposition analysis was used to research the primary driving forces behind energy-related carbon dioxide emissions per capita for the period 1993 to 2017 in a panel of South American countries. Evidence was found that the effect of per capita renewable productivity was challenging and compromised in South Latin American countries. Decoupling changed from a weak state to a strong decoupling state after the Kyoto protocol. When we remove the renewable productivity per capita effect, the results show that the state of strong decoupling was mainly achieved due to a group of economic drivers, with the negative changes in energy intensity, and in the gross domestic investment, proving to be the most significant contributors to decreasing CO2 emission per capita.

The impact of foreign direct investment on emission reduction targets: Evidence from high- and middle-income countries.

Besides bringing countries closer, the effects of globalization can help increase the production of goods and services, and foster economic growth. Foreign direct investment (FDI) is one of the processes of globalization. One aspect of globalization that has piqued the interest of economists, is the transfer of polluting industries between countries. A principal factor in this are discrepancies of environmental regulations, and these have also been instrumental in a failure to control pollution worldwide. With this impasse in mind, a Panel Autoregressive Distributed Lag was applied to evaluate the impacts of FDI on the carbon dioxide emissions of 21 countries divided by income level, for a period from 2001 to 2017. This methodology allowed the analysis of the resulting dynamics of pollution into the short-run and long-run. The characteristics of efficiency, innovation, and regulation are crucial to better understand the consequences of flows in FDI. Regulation seems to increase pollution in high-income countries, which merits further discussion. FDI decreases emissions in high-income countries, while increasing them in the short-run in middle-income countries, which supports the Pollution Haven Hypothesis. Nonetheless, the capacity of middle-income countries to absorb technology is crucial for them to benefit in the long-run. Trade openness is also highly influenced by environmental regulation in middle-income countries. Since our aim is to understand the transfer of polluting industries, an analysis of emissions from the industrial sector provided a robustness check. It also revealed that policymakers do not seem to be paying sufficient attention to innovation and controlling the environmental degradation that this sector causes.

Accommodating renewable energy sources in a small electricity market: An analysis considering the interactions of sources within Portugal and Spain.

The Portuguese and the Spanish electricity generation systems are analysed in this paper. The Iberian market has been isolated and has an increasing proportion of renewable sources. The main objective of this study is to understand how electricity generation sources are interacting with electricity wholesale prices. The VAR approach was used because of its high robustness to cope with the endogeneity detected by Granger block Exogeneity tests. To do this, workweek data recorded since the opening of the Iberian market (July 2, 2007) was used. Despite the geographical proximity of the countries and their access to natural resources, the results provide empirical evidence of different modes of interaction in the market. This outcome could be due to the different sizes of the national systems. The Portuguese electricity generating system does not have an extensive structure to share back-up with Spain via conventional sources. Spain's substantial generation structure could be used to provide intermittent back-up generation for Portugal. Considering the similar supply and demand patterns of the Iberian generation systems, their openness to the other markets with different consumption and generation patterns could allow a more rational utilization of the renewables already deployed and, consequently, bring greater efficiency to the Iberian electricity market.

Does financial openness increase environmental degradation? Fresh evidence from MERCOSUR countries.

This article researches the impact of financial openness on environmental degradation in the MERCOSUR countries over the time spanning from 1980 to 2014. The Panel Autoregressive Distributed Lag (PARDL), in the form of Unrestricted Error Correction Model (UECM), was computed with the purpose of decomposing the total effects of variables in their short- and long-run ones. The results of short-run impacts and elasticities of PARDL model showed that the financial openness increases the CO2 emissions both in the short- and in the long-run. Moreover, the results also support that economic growth, consumption of primary energy, and agricultural production are responsible for an increase of emissions in the MERCOSUR countries. Therefore, these empirical findings will help expand the literature that assesses the impact of financial development on the environment. The results also point out to the need of policymakers to change the way the energy mix is financed.

The impact of economic growth on CO2 emissions in Australia: the environmental Kuznets curve and the decoupling index.

Australia is the sixth largest country in the world, celebrating its 26th consecutive year without a recession. However, the country is one of the ten largest emitters of greenhouse gases, mainly caused by energy use. As such, Australia is facing a trade-off between economic growth and reducing carbon dioxide (CO2) emissions. This paper empirically analyses the relationship between economic growth and CO2 emissions in Australia, based on annual data from 1965 to 2016, considering the consumption of the fossil fuels oil and coal and renewable energy. This analysis is performed using the environmental Kuznets curve (EKC) and the Decoupling Index (DI). The EKC is assessed by employing the autoregressive distributed lag model. In addition, a robustness check is provided through the vector error correction model, which allows for the employment of the Granger causality test. The results show that in Australia, there is evidence for the EKC hypothesis, and that the country is undergoing increasing relative decoupling. These results mean that economic growth causes CO2 emissions and consequently environmental degradation. To achieve environmental targets and reduce the rate of CO2 emissions while continuing to grow, Australia needs to implement measures and policies to cut CO2 emissions, such as energy demand management and control, energy efficiency, reducing fossil fuel consumption, and investing in renewable energy technology.

Renewable energy and greenhouse gas emissions from the waste sectors of European Union member states: a panel data analysis.

In the last two decades, there has been a rich debate about the environmental degradation that results from exposure to solid urban waste. Growing public concern with environmental issues has led to the implementation of various strategic plans for waste management in several developed countries, especially in the European Union. In this paper, the relationships were assessed between economic growth, renewable energy extraction and greenhouse gas (GHG) emissions in the waste sector. The Environmental Kuznets Curve hypothesis was analysed for the member states of the European Union, in the presence of electricity generation, landfill and GHG emissions for the period 1995 to 2012. The results revealed that there is no inverted-U-shaped relationship between income and GHG emissions in European Union countries. The renewable fuel extracted from waste contributes to a reduction in GHG, and although the electricity produced also increases emissions somewhat, they would be far greater if the waste-based generation of renewable energy did not take place. The waste sector needs to strengthen its political, economic, institutional and social communication instruments to meet its aims for mitigating the levels of pollutants generated by European economies. To achieve the objectives of the Horizon 2020 programme, currently in force in the countries of the European Union, it will be necessary to increase the share of renewable energy in the energy mix.

Are renewable energy policies upsetting carbon dioxide emissions? The case of Latin America countries.

The impact of renewable energy policies in carbon dioxide emissions was analysed for a panel of ten Latin American countries, for the period from 1991 to 2012. Panel autoregressive distributed lag methodology was used to decompose the total effect of renewable energy policies on carbon dioxide emissions in its short- and long-run components. There is evidence for the presence of cross-sectional dependence, confirming that Latin American countries share spatial patterns. Heteroskedasticity, contemporaneous correlation, and first-order autocorrelation cross-sectional dependence are also present. To cope with these phenomena, the robust dynamic Driscoll-Kraay estimator, with fixed effects, was used. It was confirmed that the primary energy consumption per capita, in both the short- and long-run, contributes to an increase in carbon dioxide emissions, and also that renewable energy policies in the long-run, and renewable electricity generation per capita both in the short- and long-run, help to mitigate per capita carbon dioxide emissions.