The relationship between foreign direct investment, economic growth, energy consumption and CO2 emissions: Evidence from ARDL model with a structural break for Turkey

Öz

This paper investigates the impact of foreign direct investments, energy consumption and economic growth on CO2 emissions in Turkey for the period of 1974-2015 by using autoregressive distributed lag (ARDL) model with a structural break. FMOLS and DOLS estimations are employed to check robustness of the model. The findings reveal a long-run relationship between the variables, and show that FDI contributes positively to CO2 emissions, validating pollution haven hypothesis. Economic growth has significantly positive relationship with CO2 emissions whereas impact of its square on CO2 emissions is also significant, but negative which confirms Environmental Kuznets Curve hypothesis. Energy consumption is also positively associated with CO2 emissions, meaning that higher levels of energy consumption lead to a higher environmental degradation. The dummy variable including the structural break is also statistically significant and positive. It is concluded that because of FDI inflows engender an increment in carbon emissions, Turkey should adopt cleaner technologies to avoid environmental pollution.

Anahtar Kelimeler

• CO2 emissions
• pollution haven hypothesis
• foreign direct investment
• energy
• economic growth.

Kaynakça

1. Abbas, S., Kousar, S. & Pervaiz, A. (2021). Effects of energy consumption and ecological footprint on CO2 emissions: an empirical evidence from Pakistan. Environment, Development and Sustainability, 23(9), 13364-13381.
2. Adebayo, T. S., & Akinsola, G. D. (2021). Investigating the Causal Linkage Among Economic Growth, Energy Consumption and CO 2 Emissions in Thailand: An Application of the Wavelet Coherence Approach. International Journal of Renewable Energy Development, 10(1), 17-26.
3. Agboola, P. O., Hossain, M., Gyamfi, B. A. & Bekun, F. V. (2022). Environmental consequences of foreign direct investment influx and conventional energy consumption: evidence from dynamic ARDL simulation for Turkey. Environmental Science and Pollution Research, 1-14.
4. Ahmed, Z., Ahmad, M., Murshed, M., Vaseer, A. I. & Kirikkaleli, D. (2022). The trade-off between energy consumption, economic growth, militarization, and CO2 emissions: does the treadmill of destruction exist in the modern world? Environmental Science and Pollution Research, 29(12), 18063-18076.
5. Akbostanci, E., Turut-Asik, S. & Tunc, G. İ. (2009). The relationship between income and environment in Turkey: is there an environmental Kuznets curve? Energy Policy, 37(3), 861-867.
6. Akinlo, A. E. (2004). Foreign direct investment and growth in Nigeria: An empirical investigation. Journal of Policy Modeling, 26(5), 627-639.
7. Al-Mulali, U., Saboori, B., & Ozturk, I. (2015). Investigating the environmental Kuznets curve hypothesis in Vietnam. Energy Policy, 76, 123-131.
8. Al-Mulali, U. & Tang, C. F. (2013). Investigating the validity of pollution haven hypothesis in the gulf cooperation council (GCC) countries. Energy Policy, 60, 813-819.

9. Alam, M. J., Begum, I. A., Buysse, J., & Van Huylenbroeck, G. (2012). Energy consumption, carbon emissions and economic growth nexus in Bangladesh: Cointegration and dynamic causality analysis. Energy Policy, 45, 217-225.
10. Alfaro, L., Chanda, A., Kalemli-Ozcan, S. & Sayek, S. (2010). Does foreign direct investment promote growth? Exploring the role of financial markets on linkages. Journal of Development Economics, 91(2), 242-256.
11. Alshehry, A. S. & Belloumi, M. (2015). Energy consumption, carbon dioxide emissions and economic growth: The case of Saudi Arabia. Renewable and Sustainable Energy Reviews, 41, 237-247.
12. Apergis, N. & Payne, J. E. (2009). CO2 emissions, energy usage, and output in Central America. Energy Policy, 37(8), 3282-3286.
13. Bakhsh, K., Rose, S., Ali, M. F., Ahmad, N. & Shahbaz, M. (2017). Economic growth, CO2 emissions, renewable waste and FDI relation in Pakistan: New evidences from 3SLS. Journal of Environmental Management, 196, 627-632.
14. Balibey, M. (2015). Relationships among CO2 emissions, economic growth and foreign direct investment and the environmental Kuznets curve hypothesis in Turkey. International Journal of Energy Economics and Policy, 5(4), 1042-1049.
15. Balli, E., Sigeze, C., Ugur, M. S. & Çatık, A. N. (2021). The relationship between FDI, CO2 emissions, and energy consumption in Asia-Pacific economic cooperation countries. Environmental Science and Pollution Research, 1-18.
16. Balsalobre-Lorente, D., Gokmenoglu, K. K., Taspinar, N. & Cantos-Cantos, J. M. (2019). An approach to the pollution haven and pollution halo hypotheses in MINT countries. Environmental Science and Pollution Research, 26(22), 23010-23026.
17. Barbier, E. (2011). The policy challenges for green economy and sustainable economic development. Natural Resources Forum, 35(3), 233-245.
18. Basar, S. & Temurlenk, M. S. (2007). Environmental Kuznets Curve: An Empirical Analysis for Turkey. Ataturk Universitesi, IIBF Dergisi, 21(1), 1-12.
19. Bekhet, H. A., Matar, A. & Yasmin, T. (2017). CO2 emissions, energy consumption, economic growth, and financial development in GCC countries: Dynamic simultaneous equation models. Renewable and Sustainable Energy Reviews, 70, 117-132.
20. Bekun, F. V., Emir, F. & Sarkodie, S. A. (2019). Another look at the relationship between energy consumption, carbon dioxide emissions, and economic growth in South Africa. Science of the Total Environment, 655, 759-765.
21. Bin, S. & Yue, L. (2012). Impact of foreign direct investment on China’s environment: An empirical study based on industrial panel data. Social Sciences in China, 33(4), 89-107.
22. Bildirici, M. E. (2021). Terrorism, environmental pollution, foreign direct investment (FDI), energy consumption, and economic growth: evidences from China, India, Israel, and Turkey. Energy & Environment, 32(1), 75-95.
23. Borensztein, E., De Gregorio, J. & Lee, J. W. (1998). How does foreign direct investment affect economic growth? Journal of international Economics, 45(1), 115-135.
24. Boutabba, M. A. (2014). The impact of financial development, income, energy and trade on carbon emissions: evidence from the Indian economy. Economic Modelling, 40, 33-41.
25. Bukhari, N., Shahzadi, K. & Ahmad, M. S. (2014). Consequence of FDI on CO2 emissions in case of Pakistan. Middle-East Journal of Scientific Research, 20(9), 1183-1189.
26. Bulut, U. (2021). Environmental sustainability in Turkey: an environmental Kuznets curve estimation for ecological footprint. International Journal of Sustainable Development & World Ecology, 28(3), 227-237.
27. Caves, R. E. (1971). International corporations: The industrial economics of foreign investment. Economica, 38(149), 1-27.
28. Chandran, V. G. R. & Tang, C. F. (2013). The impacts of transport energy consumption, foreign direct investment and income on CO2 emissions in ASEAN-5 economies. Renewable and Sustainable Energy Reviews, 24, 445-453.
29. Cole, M. A. (2007). Corruption, income and the environment: an empirical analysis. Ecological Economics, 62(3-4), 637-647.
30. Dogan, E., Ulucak, R., Kocak, E. & Isik, C. (2020). The use of ecological footprint in estimating the environmental Kuznets curve hypothesis for BRICST by considering cross-section dependence and heterogeneity. Science of the Total Environment, 723, 138063.
31. Duan, Y. & Jiang, X. (2021). Pollution haven or pollution halo? A Re-evaluation on the role of multinational enterprises in global CO2 emissions. Energy Economics, 97, 105181.
32. Elgin, C. & Oztunalı, O. (2014). Environmental Kuznets curve for the informal sector of Turkey (1950-2009). Panoeconomicus, 61(4), 471-485.
33. Essandoh, O. K., Islam, M. & Kakinaka, M. (2020). Linking international trade and foreign direct investment to CO2 emissions: Any differences between developed and developing countries? Science of the Total Environment, No. 712, 136437.
34. Faras, R. Y. & Ghali, K. H. (2009). Foreign direct investment and economic growth: the case of the GCC countries. International Research Journal of Finance and Economics, 29, 134-145
35. Go, Y. H., Lau, L. S., Liew, F. M., & Senadjki, A. (2021). A transport environmental Kuznets curve analysis for Malaysia: exploring the role of corruption. Environmental Science and Pollution Research, 28(3), 3421-3433.
36. Gokmenoglu, K. & Taspinar, N. (2016). The relationship between CO2 emissions, energy consumption, economic growth and FDI: the case of Turkey. The Journal of International Trade & Economic Development, 25(5), 706-723.
37. Grossman, G. M. & Krueger, A. B. (1991). Environmental impacts of a North American free trade agreement. NBER Working Paper Series, WP No. 3914. NBER: Cambridge.
38. Gurluk, S. & Karaer, F. (2004). On The Examination of the Relation between Economic Growth and Environmental Pollution. Tarim Ekonomisi Dergisi, 10(1, 2), 43-54.
39. Halicioglu, F. (2009). An econometric study of CO2 emissions, energy consumption, income and foreign trade in Turkey. Energy Policy, 37(3), 1156-1164.
40. Hanley, N., Shogren, J. & White, B. (2019). Introduction to Environmental Economics. Oxford: Oxford University Press.
41. Haug, A. A. & Ucal, M. (2019). The role of trade and FDI for CO2 emissions in Turkey: Nonlinear relationships. Energy Economics, 81, 297-307.
42. He, J. (2006). Pollution haven hypothesis and environmental impacts of foreign direct investment: The case of industrial emission of sulfur dioxide (SO2) in Chinese provinces. Ecological Economics, 60(1), 228-245.
43. Hossain, M. S. (2011). Panel estimation for CO2 emissions, energy consumption, economic growth, trade openness and urbanization of newly industrialized countries. Energy Policy, 39(11), 6991-6999.
44. Huynh, C. M. & Hoang, H. H. (2019). Foreign direct investment and air pollution in Asian countries: does institutional quality matter? Applied Economics Letters, 26(17), 1388-1392.
45. Jalil, A. & Feridun, M. (2011). The impact of growth, energy and financial development on the environment in China: a cointegration analysis. Energy Economics, 33(2), 284-291.
46. Jie, H. E. (2008). Foreign direct investment and air pollution in China: evidence from Chinese cities. Région et Développement, 28, 132-150.
47. Iamsiraroj, S. (2016). The foreign direct investment–economic growth nexus. International Review of Economics & Finance, 42, 116-133.
48. Isiksal, A. Z., Samour, A. & Resatoglu, N. G. (2019). Testing the impact of real interest rate, income, and energy consumption on Turkey’s CO2 emissions. Environmental Science and Pollution Research, 26(20), 20219-20231.
49. Jugurnath, B. & Emrith, A. (2018). Impact of foreign direct investment on environment degradation: evidence from SIDS countries. The Journal of Developing Areas, 52(2), 13-26.
50. Karahasan, B. C. & Pinar, M. (2021). The environmental Kuznets curve for Turkish provinces: a spatial panel data approach. Environmental Science and Pollution Research, 1-13.
51. Kaya, G., Kayalica, M. Ö., Kumaş, M. & Ulengin, B. (2017). The role of foreign direct investment and trade on carbon emissions in Turkey. Environmental Economics, 8(1), 8-17.
52. Kilicarslan, Z. & Dumrul, Y. (2017). Foreign direct investments and CO2 emissions relationship: the case of Turkey. Business & Economics Research Journal, 8(4), 647-660.
53. Kisswani, K. M. & Zaitouni, M. (2021). Does FDI affect environmental degradation? Examining pollution haven and pollution halo hypotheses using ARDL modelling. Journal of the Asia Pacific Economy, 1-27.
54. Kizilkaya, O. (2017). The impact of economic growth and foreign direct investment on CO2 emissions: the case of Turkey. Turkish Economic Review, 4(1), 106-118.
55. Kocak, E. (2014). The Validity of the Environmental Kuznets Curve Hypothesis in Turkey: ARDL Bounds Test Approach. Isletme ve Iktisat Calismalari Dergisi, 2(3), 62-73.
56. Kocak, E. & Sarkgunesi, A. (2018). The impact of foreign direct investment on CO2 emissions in Turkey: new evidence from cointegration and bootstrap causality analysis. Environmental Science and Pollution Research, 25(1), 790-804.
57. Kripfganz, S., & Schneider, D. C. (2018). Ardl: Estimating autoregressive distributed lag and equilibrium correction models. London Stata Conference, September 7.
58. Liang, F. H. (2014). Does foreign direct investment harm the host country’s environment? Evidence from China. Evidence from China. Current Topics in Management,17, 105-121.
59. Lv, Z. & Xu, T. (2019). Trade openness, urbanization and CO2 emissions: dynamic panel data analysis of middle-income countries. The Journal of International Trade & Economic Development, 28(3), 317-330.
60. MacDougall, G. D. A. (1960). The benefits and costs of private investment from abroad: A theoretical approach 1. Bulletin of the Oxford University Institute of Economics & Statistics, 22(3), 189-211.
61. Mencinger, J. (2003). Does foreign direct investment always enhance economic growth? Kyklos, 56(4), 491-508.
62. Menyah, K. & Wolde-Rufael, Y. (2010). Energy consumption, pollutant emissions and economic growth in South Africa. Energy Economics, 32(6), 1374-1382.
63. Mert, M., Boluk, G. & Caglar, A. E. (2019). Interrelationships among foreign direct investments, renewable energy, and CO 2 emissions for different European country groups: a panel ARDL approach. Environmental Science and Pollution Research, 26(21), 21495-21510.
64. Mert, M. & Caglar, A. E. (2020). Testing pollution haven and pollution halo hypotheses for Turkey: a new perspective. Environmental Science and Pollution Research, 27(26), 32933-32943.
65. Mike, F. (2020). Does The Pollution Haven Hypothesis Hold for Turkey? The Findings from ARDL Bound Test. Dogus Universitesi Dergisi, 21(2), 107-121.
66. Mutafoglu, T. H. (2012). Foreign direct investment, pollution, and economic growth: evidence from Turkey. Journal of Developing Societies, 28(3), 281-297.
67. Omay, R. E. (2013). The relationship between environment and income: regression spline approach. International Journal of Energy Economics and Policy, 3(4), 52-61.
68. Omri, A., Daly, S., Rault, C. & Chaibi, A. (2015) Financial development, environmental quality, trade and economic growth: what causes what in MENA countries. Energy. Econ. 48, 242-252.
69. Ozcan, B., Apergis, N. & Shahbaz, M. (2018). A revisit of the environmental Kuznets curve hypothesis for Turkey: new evidence from bootstrap rolling window causality. Environmental Science and Pollution Research, 25(32), 32381-32394.
70. Ozturk, Z. & Oz, D. (2016). The relationship between energy consumption, income, foreign direct investment, and CO2 emissions: the case of Turkey. Cankiri Karatekin University Journal of Faculty of Economics and Administrative Sciences, 6(2), 269-288.
71. Panayotou, T. (1997). Demystifying the environmental Kuznets curve: turning a black box into a policy tool. Environment and development economics, 2(4), 465-484.
72. Pao, H. T., & Tsai, C. M. (2010). CO2 emissions, energy consumption and economic growth in BRIC countries. Energy policy, 38(12), 7850-7860.
73. Pao, H. T. & Tsai, C. M. (2011). Multivariate Granger causality between CO2 emissions, energy consumption, FDI (foreign direct investment) and GDP (gross domestic product): evidence from a panel of BRIC (Brazil, Russian Federation, India, and China) countries. Energy, 36(1), 685-693.
74. Pata, U. K. (2018). Renewable energy consumption, urbanization, financial development, income and CO2 emissions in Turkey: testing EKC hypothesis with structural breaks. Journal of Cleaner Production, 187, 770-779.
75. Pata, U. K. (2019). Environmental Kuznets curve and trade openness in Turkey: bootstrap ARDL approach with a structural break. Environmental Science and Pollution Research, 26(20), 20264-20276.
76. Pazienza, P. (2019). The impact of FDI in the OECD manufacturing sector on CO2 emission: Evidence and policy issues. Environmental Impact Assessment Review, 77, 60-68.
77. Sadorsky, P. (2011). Financial development and energy consumption in Central and Eastern European frontier economies. Energy Policy, 39(2), 999-1006.
78. Salehnia, N., Karimi Alavijeh, N. & Salehnia, N. (2020). Testing Porter and pollution haven hypothesis via economic variables and CO2 emissions: a cross-country review with panel quantile regression method. Environmental Science and Pollution Research, 27(25), 31527-31542.
79. Seker, F., Ertugrul, H. M. & Cetin, M. (2015). The impact of foreign direct investment on environmental quality: a bounds testing and causality analysis for Turkey. Renewable and Sustainable Energy Reviews, 52, 347-356.
80. Shahbaz, M., Hye, Q. M. A., Tiwari, A. K., & Leitão, N. C. (2013a). Economic growth, energy consumption, financial development, international trade and CO2 emissions in Indonesia. Renewable and Sustainable Energy Reviews, 25, 109-121.
81. Shahbaz, M., Tiwari, A. K. & Nasir, M. (2013b). The effects of financial development, economic growth, coal consumption and trade openness on CO2 emissions in South Africa. Energy Policy, 61, 1452-1459.
82. Shahbaz, M., Nasreen, S., Abbas, F. & Anis, O. (2015). Does foreign direct investment impede environmental quality in high-, middle-, and low-income countries? Energy Economics, 51, 275-287.
83. Sharif, A., Baris-Tuzemen, O., Uzuner, G., Ozturk, I. & Sinha, A. (2020). Revisiting the role of renewable and non-renewable energy consumption on Turkey’s ecological footprint: Evidence from Quantile ARDL approach. Sustainable Cities and Society, 57, 102138.
84. Shinwari, R., Wang, Y., Maghyereh, A. & Awartani, B. (2022). Does Chinese foreign direct investment harm CO2 emissions in the Belt and Road Economies. Environmental Science and Pollution Research, 1-17.
85. Sinha, A., Gupta, M., Shahbaz, M., & Sengupta, T. (2019). Impact of corruption in public sector on environmental quality: Implications for sustainability in BRICS and next 11 countries. Journal of Cleaner Production, 232, 1379-1393.
86. Solarin, S. A., Al-Mulali, U., Musah, I. & Ozturk, I. (2017). Investigating the pollution haven hypothesis in Ghana: an empirical investigation. Energy, 124, 706-719.
87. Soytas, U., Sari, R. & Ewing, B. T. (2007). Energy consumption, income, and carbon emissions in the United States. Ecological Economics, 62(3-4), 482-489.
88. Ssali, M. W., Du, J., Mensah, I. A. & Hongo, D. O. (2019). Investigating the nexus among environmental pollution, economic growth, energy use, and foreign direct investment in 6 selected sub-Saharan African countries. Environmental Science and Pollution Research, 26(11), 11245-11260.
89. Stern, D. I. (2004). The rise and fall of the environmental Kuznets curve. World Development, 32(8), 1419-1439.
90. Tamazian, A. & Rao, B. B. (2010). Do economic, financial and institutional developments matter for environmental degradation? Evidence from transitional economies. Energy Economics, 32(1), 137-145.
91. Tang, J. (2015). Testing the pollution haven effect: Does the type of FDI matter? Environmental and Resource Economics, 60(4), 549-578.
92. Tang, C. F. & Tan, B. W. (2015). The impact of energy consumption, income and foreign direct investment on carbon dioxide emissions in Vietnam. Energy, 79, 447-454.
93. Tirgil, A., Acar, Y. & Ozgur, O. (2021). Revisiting the environmental Kuznets curve: evidence from Turkey. Environment, Development and Sustainability, 23(10), 14585-14604. World Bank (2022). World Bank Data, data.worldbank.org (Accessed on 12.02.2022).
94. Xu, C., Zhao, W., Zhang, M. & Cheng, B. (2021). Pollution haven or halo? The role of the energy transition in the impact of FDI on SO2 emissions. Science of the Total Environment, 763, 143002.
95. Zakari, A., Adedoyin, F. F. & Bekun, F. V. (2021). The effect of energy consumption on the environment in the OECD countries: economic policy uncertainty perspectives. Environmental Science and Pollution Research, 28(37), 52295-52305.
96. Zhang, X. P. & Cheng, X. M. (2009). Energy consumption, carbon emissions, and economic growth in China. Ecological Economics, 68(10), 2706-2712.
97. Zhang, S., Liu, X. & Bae, J. (2017). Does trade openness affect CO2 emissions: evidence from ten newly industrialized countries? Environmental Science and Pollution Research, 24(21), 17616-17625.
98. Zhu, H., Duan, L., Guo, Y. & Yu, K. (2016). The effects of FDI, economic growth and energy consumption on carbon emissions in ASEAN-5: evidence from panel quantile regression. Economic Modelling, 58, 237-248.