Foreign direct investment, trade openness, energy consumption and CO2 emission: evidence from Iran and Saudi Arabia Online publication date: Thu, 07-Jan-2021
by Sedigheh Atrkar Roshan; Zeinab Adinehvand; Mozhgan Sobhani
International Journal of Sustainable Economy (IJSE), Vol. 12, No. 4, 2020
Abstract: The purpose of this paper is to investigate the impact of foreign direct investment, trade openness, energy consumption, and economic growth on CO2 emissions in Iran and Saudi Arabia. By applying the Johanson-Juselius cointegration and vector error correction model, the short and long-term relationship between the variables during the period of 1980 to 2016 is examined. The findings of the cointegration analysis indicate that there is a long-run relationship between the CO2 emissions and the independent variables of the model. Our results also show that the error-correction coefficient is negative and less than unity for both countries, showing a stable move towards equilibrium. The findings indicate that FDI tends to increase CO2 emissions in Iran so that the pollution haven hypothesis cannot be rejected in this case. Thus, an energy tax on FDI-invested high-pollution companies and high-energy consumption projects is suggested to improve the environmental quality in this country.
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