Impact of foreign direct investment on methane emissions in agriculture: An empirical evidence based on Sub‐Saharan Africa

Abstract

The issue of greenhouse gas emissions from foreign direct investment (FDI) continues to fuel debate in the climate change mitigation literature. Some support the pollution halo hypothesis while others emphasize on the pollution haven hypothesis. Thus, the overall objective of this research is to analyze the effect of agricultural foreign direct investment on methane emissions in Sub‐Saharan Africa. The data for the study are from several sources, mainly FAOSTAT, WDI, and Chin‐Ito Index. For econometric estimations, Dynamic Ordinary Least Squares (DOLS) model is applied to unbalanced panel data and the Fully Modified Ordinary Least Squares (FMOLS) is used for robustness check. The results indicate that increasing agricultural foreign direct investment by 1% increases methane emissions by 3.30% in Sub‐Saharan Africa, thus confirming the pollution haven hypothesis. Consequently, the move toward the Paris Agreement is proving to be delicate in an increasing agricultural FDI context. Thus, the integration of climate change mitigation strategies into the business plans of foreign agricultural investors is strongly recommended in Sub‐Saharan Africa.