The impact of foreign direct investment (FDI) on renewable and non-renewable energy in Bangladesh: does the global climate change emergencies required?

Abstract

Purpose

The purpose of this study is to identify the effects of MNCs measured by the foreign direct investment (FDI) inflows on the promotion of renewable energy consumption and non-renewable energy in Bangladesh. It is an emergency issue these days and makes some policy suggestions.

Design/methodology/approach

Based on the literature review, the study sets a time series models to empirically test FDI degrades the environmental quality in Bangladesh, using the parametric (GMM, IV estimations) and non-parametric approaches (quantile regression).

Findings

The main findings drawn from the empirical analysis are as follows. First, the FDI inflows lead to more CO₂ emissions in the Bangladeshi economy. In other words, the MNCs promote the usages of non-renewable energy which causes an increase in pollution. Second, the FDI inwards discourage renewable energy consumption and in terms of magnitude, the negative impacts of FDI on renewable energy are higher than the positive effect of FDI on CO₂ emissions. This makes the situation worse.

Research limitations/implications

This study is limited to Bangladesh and explores the total impact of FDI on the environment. For further investigation, it would be better to do a detailed investigation on the FDI-renewable and nonrenewable energy relationship. For instance, one could test which type of FDI promotes green energy consumption and which one is dirtier. So, the sectorial FDI effects on pollution.

Originality/value

Most past studies parametric techniques and did not compare the effects of FDI on renewable and non-renewable energy consumption, Unlike the previous empirical studies, this paper uses GMM and IV estimations for the parametric approach and quantile regression (QR) as a robustness check. Also, it is the first study that approves the crowding-out effect of non-renewable using the FDI channel.

Citation

Elheddad, M., Alfar, A.J.K., Haloub, R., Sharma, N. and Gomes, P. (2022), "The impact of foreign direct investment (FDI) on renewable and non-renewable energy in Bangladesh: does the global climate change emergencies required?", International Journal of Emergency Services, Vol. 11 No. 3, pp. 409-421. https://doi.org/10.1108/IJES-12-2021-0083