The Impact of Foreign Direct Investment and Biomass Energy Consumption on Pollution in BRICS Countries: A Panel Data Analysis

Abstract

The relationship between foreign direct investment and carbon emissions in the BRICS (Brazil, Russian Federation, India, China, and South Africa) countries for 1992–2017 is investigated in this study. Biomass energy consumption and per capita income variables are also added to the model as additional determinants of pollution. To test the pollution haven hypothesis, panel fixed-effects and random-effects models are employed. The findings show that an N-shaped association exists between foreign direct investment and CO₂ in BRICS countries. In addition, the empirical results also suggest that there is both an inverted-U and an inverted-N-shaped connection between income and pollution. Finally, the quadratic fixed-effects model results imply that biomass energy consumption has significant contribution to environmental degradation in these countries. When the results are interpreted, BRICS countries are suggested to provide more incentives to renewable energy sources and accelerate the development of the green energy system to attract clean resources and prevent environmental degradation.