Doing Business and Increasing Emissions? An Exploratory Analysis of the Impact of Business Regulation on CO2 Emissions

Abstract

Since 2005, the World Bank has released a data set titled Doing Business: Measuring Business Regulations. These data have become an important set of indicators of international business climate. However, the impacts of pro-business regulation on the environment have generally been overlooked. To help resolve this problem, I estimate a time-series cross-sectional Prais-Winsten regression model to test the relationship between business climate—represented by the World Bank’s Doing Business data set—and carbon dioxide (CO2) emissions in developing nations over 10 years, from 2005 to 2014. The results show that there is a statistically significant and positive association between business climate and CO2 emissions in developing nations. This shows that pro-business regulations contribute to increasing CO2 emissions in developing nations, a major driver of global climate change. I suggest that these results are due to business climate encouraging environmental load displacement, which posits that developed nations are partially displacing their environmental impacts onto developing nations.