The relationship between CO2 and Foreign Direct Investment in the agriculture and fishing sector of OECD countries: Evidence and policy considerations

Abstract

This work focuses on the relationship between Foreign Direct Investment (FDI) and the environment. More specifically, it investigates the impact FDI inflowing the “agriculture and fishing” sector of OECD countries exerts on Carbon dioxide (CO₂) emissions level deriving from sectoral fuel combustion. To this end, a purpose-built dataset containing statistics for 30 OECD countries over 25 years (from 1981 to 2005) is analyzed through the econometric technique of panel data. Apart from other evidence, the result of the analysis shows the existence of negative relationships characterizing the technique (–0.0848), scale (−0.0036) and cumulative (–0.0044) effects of FDI on CO₂. From an environmental-economic point of view, this outcome would mean that an increase of the considered type of FDI reduces the CO₂ level. It might be concluded, therefore, that FDI plays a beneficial role in the environment. However, a more in-depth look at the quantitative aspect of the coefficients achieved and just mentioned would help us to highlight more appropriately the neutral role FDI has on the considered environmental feature. In terms of policy considerations, this evidence does not allow us to argue against those strategies aimed at enforcing the flow of FDI into the sector under our consideration.