Energy Consumption, Trade Openness, CO2 Emissions, and the Pollution Haven Hypothesis in Turkey: Evidence from Novel Dynamic ARDL Simulations

Abstract

With the global environmental sustainability at serious risk, studies on the determinants of environmental degradation become important. The effect of foreign direct investments on environmental degradation can be examined within the scope of the pollution haven hypothesis. Again, the effect of energy consumption and trade openness on environmental degradation indicators is also important in terms of forming policies for the future of countries.The main purpose of this study is to examine the impact of foreign direct investment, energy consumption and trade openness on environmental quality and the validity of the pollution haven hypothesis in Turkey. As a result of the analyses employed with the novel dynamic ARDL simulations method using annual time series data between 1970 and 2020, it has been determined that (1) increases (decreases) in foreign direct investments worsen (improve) the environmental quality and therefore the pollution haven hypothesis is valid for Turkey; (2) increases (decreases) in energy use have deteriorating (improving) effects on environmental quality; (3) increase (decrease) of trade openness affects the environmental quality positively (negatively); (4) the effect of energy use (trade openness) on environmental quality is more (less) than other variables. Finally, suggestions were made to policymakers in line with the findings.

Keywords

• pollution haven hypothesis
• foreign direct investment
• energy consumption
• trade openness
• CO2 emissions
• environment quality
• dynamic ARDL simulations approach

Türkiye’de Enerji Tüketimi, Ticari Açıklık, CO2 emisyonları ve Kirlilik Sığınağı Hipotezi: Yeni Dinamik ARDL Simülasyonlarından Kanıtlar

Öz

Küresel olarak çevresel sürdürülebilirliğin ciddi bir şekilde risk altına girmesiyle beraber çevresel bozulmanın belirleyicilerine yönelik çalışmalar önemli hale gelmektedir. Doğrudan yabancı yatırımların çevresel bozulma üzerine etkisi, kirlilik sığınağı hipotezi kapsamında incelenebilmektedir. Yine enerji tüketimi ve ticari açıklığın çevresel bozulma göstergeleri üzerine etkisi de ülkelerin geleceğe yönelik politikalar oluşturması bakımından önemlidir. Bu çalışmanın temel amacı, doğrudan yabancı yatırımlar, enerji tüketimi ve ticari açıklığın çevre kalitesi üzerindeki etkisini ve kirlilik sığınağı hipotezinin geçerliliğini Türkiye’de incelemektir. 1970-2020 arasındaki yıllık zaman serisi verileri kullanılarak yeni dinamik ARDL simülasyonları yöntemi ile gerçekleştirilen analizler sonucunda (1) doğrudan yabancı yatırımlardaki artışların (azalışların) çevre kalitesini kötüleştirdiği (iyileştirdiği) ve dolayısıyla kirlilik sığınağı hipotezinin Türkiye için geçerli olduğu; (2) enerji kullanımı artışlarının (azalışlarının) çevre kalitesi üzerinde kötüleştirici (iyileştirici) etkilerinin olduğu; (3) ticari açıklığın artmasının (azalmasının) çevre kalitesini olumlu (olumsuz) etkilediği; (4) enerji kullanımının (ticari açıklığın) çevre kalitesi üzerindeki etkisinin diğer değişkenlere göre daha fazla (az) olduğu belirlenmiştir. Son olarak elde edilen bulgular doğrultusunda politika yapıcılara önerilerde bulunulmuştur.

Anahtar Kelimeler

• kirlilik sığınağı hipotezi
• doğrudan yabancı yatırımlar
• enerji tüketimi
• ticari açıklık
• CO2 emisyonları
• çevre kalitesi
• dinamik ARDL simülasyonları yaklaşımı

Kaynakça

1. Abbasi, K. R., Adedoyin, F. F., Abbas, J., & Hussain, K. (2021). The impact of energy depletion and renewable energy on CO2 emissions in Thailand: Fresh evidence from the novel dynamic ARDL simulation. Renewable Energy, 180, 1439-1450.
2. Adom, P. K., Amuakwa-Mensah, F., & Agradi, M. P. (2021). Energy poverty, development outcomes, and transition to green energy. Renewable Energy, 178, 1337-1352.
3. Ahad, M., & Imran, Z. A. (2022). The role of shadow economy to determine CO2 Emission in Pakistan: evidence from novel dynamic simulated ARDL model and wavelet coherence analysis. Environment, Development and Sustainability. https://doi.org/10.1007/s10668-022-02164-2.
4. Akadiri, S. S., Bekun, F. V., & Sarkodie, S. A. (2019). Contemporaneous interaction between energy consumption, economic growth and environmental sustainability in South Africa: What drives what? Science of The Total Environment, 686, 468-475.
5. Ali, I. M. A. (2022). Income inequality and environmental degradation in Egypt: evidence from dynamic ARDL approach. Environmental Science and Pollution Research, 29, 8408-8422.
6. Ali, S., Yusop, Z., Kaliappan, S.R. & Chin, L. (2020). Dynamic common correlated effects of trade openness, FDI, and institutional performance on environmental quality: evidence from OIC countries. Environ Sci Pollut Res 27, 11671–11682 (2020). https://doi.org/10.1007/s11356-020-07768-7
7. Amin, A., Dogan, E. (2021). The role of economic policy uncertainty in the energy-environment nexus for China: Evidence from the novel dynamic simulations method. Journal of Environmental Management, 292, 112865. https://doi.org/10.1016/j.jenvman.2021.112865.
8. Ansari, M.A., Khan, N.A. & Ganaie, A.A., (2019). Does foreign direct investment impede environmental quality in Asian countries? A panel data analysis. OPEC Energy Review.

9. Antweiler, W., Copeland, B. R. & Taylor, M. S. (2001). Is Free Trade Good for the Environment? American Economic Review, 91 (4): 877-908.
10. Ashraf, A., Doytch, N. & Uctum, M. (2021). Foreign direct investment and the environment: disentangling the impact of greenfield investment and merger and acquisition sales, Sustainability Accounting, Management and Policy Journal, Vol. 12 No. 1, pp. 51-73. https://doi.org/10.1108/SAMPJ-04-2019-0184
11. Aslan, A., Altinoz, B., & Ozsolak, B. (2021). The link between urbanization and air pollution in Turkey: evidence from dynamic autoregressive distributed lag simulations. Environmental Science and Pollution Research, 28, 52370-52380.
12. Baek, J., Cho, Y. & Koo, W. W. (2009). The environmental consequences of globalization: A country-specific time-series analysis, Ecological Economics, Volume 68, Issues 8–9, Pages 2255-2264, ISSN 0921-8009, https://doi.org/10.1016/j.ecolecon.2009.02.021.
13. Boulatoff, C. & Jenkins, M. (2010). Long-term Nexus Between Openness, Income, and Environmental Quality. Int Adv Econ Res 16, 410–418 (2010). https://doi.org/10.1007/s11294-010-9283-y.
14. Bulut, U., Ucler, G., & Inglesi-Lotz, R. (2021). Does the pollution haven hypothesis prevail in Turkey? Empirical evidence from nonlinear smooth transition models. Environmental Science and Pollution Research, 28, 38563-38572.
15. Danish, & Ulucak, R. (2020). Linking biomass energy and CO2 emissions in China using dynamic Autoregressive-Distributed Lag simulations. Journal of Cleaner Production, 250, 119533. https://doi.org/10.1016/j.jclepro.2019.119533.
16. Danish, & Ulucak, R. (2021). Renewable energy, technological innovation and the environment: A novel dynamic auto-regressive distributive lag simulation. Renewable and Sustainable Energy Reviews, 150, 111433. https://doi.org/10.1016/j.rser.2021.111433.
17. Danish, & Ulucak, R. (2022). Analyzing energy innovation-emissions nexus in China: A novel dynamic simulation method. Energy, 244(Part B), 123010. https://doi.org/10.1016/j.energy.2021.123010.
18. Destek, M.A. & Okumus, I. (2019). Does pollution haven hypothesis hold in newly industrialized countries? Evidence from ecological footprint. Environ Sci Pollut Res, 26, 23689–23695 . https://doi.org/10.1007/s11356-019-05614-z
19. Elliot, G., Rothenberg, T. J., & Stock, J. H., (1996). Efficient Tests for an Autoregressive Unit Root. Econometrica, 64, 813-36. Golub, S. S., C. Kauffmann & P. Yeres (2011), Defining and Measuring Green FDI: An Exploratory Review of Existing Work and Evidence, OECD Working Papers on International Investment, 2011/02, OECD Publishing. http://dx.doi.org/10.1787/5kg58j1cvcvk-en
20. Hair, J., Black, W. C., Babin, B. J. & Anderson, R. E. (2010) Multivariate data analysis (7th ed.). Upper Saddle River, New Jersey: Pearson Educational International.
21. Hdom, H. A. D., & Fuinhas, J. A. (2020). Energy production and trade openness: Assessing economic growth, CO2 emissions and the applicability of the cointegration analysis. Energy Strategy Reviews, 30, 100488. https://doi.org/10.1016/j.esr.2020.100488.
22. 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, DOI: 10.1080/13504851.2018.1563668
23. International Energy Agency. (2016). World energy statistics 2016.
24. Islam, M. S., Hossain, M. E., Khan, M. A., Rana, M. J., Ema, N. S., & Bekun, F. V. (2022). Heading towards sustainable environment: exploring the dynamic linkage among selected macroeconomic variables and ecological footprint using a novel dynamic ARDL simulations approach. Environmental Science and Pollution Research, 29, 22260-22279.
25. Jordan, S., & Philips, A. Q. (2018a). Cointegration testing and dynamic simulations of autoregressive distributed lag models. The Stata Journal, 18(4), 902-923.
26. Jordan, S., & Philips, A. Q. (2018b). Dynamic Simulation and Testing for Single-Equation Cointegrating and Stationary Autoregressive Distributed Lag Models. The R Journal, 10(2), 469-488.
27. Kallner, A. (2018). Laboratory Statistics (2nd ed.). Elsevier. https://doi.org/10.1016/C2017-0-00959-X.
28. Kamal, M.; Usman, M.; Jahanger, A. & Balsalobre-Lorente, D. (2021). Revisiting the Role of Fiscal Policy, Financial Development, and Foreign Direct Investment in Reducing Environmental Pollution during Globalization Mode: Evidence from Linear and Nonlinear Panel Data Approaches. Energies , 14, 6968. https://doi.org/10.3390/en14216968
29. Kellenberg, D. K. (2009). An empirical investigation of the pollution haven effect with strategic environment and trade policy, Journal of International Economics, Volume 78, Issue 2, Pages 242-255, ISSN 0022-1996, https://doi.org/10.1016/j.jinteco.2009.04.004.
30. Khan, M. I., Teng, J.-Z., Khan, M. K., Jadoon, A. U., & Khan, M. F. (2021). The impact of oil prices on stock market development in Pakistan: Evidence with a novel dynamic simulated ARDL approach. Resources Policy, 70, 101899. https://doi.org/10.1016/j.resourpol.2020.101899.
31. Kripfganz, S., & Schneider, D. C. (2020). Response surface regressions for critical value bounds and approximate p-values in equilibrium correction models 1. Oxford Bulletin of Economics and Statistics, 82, 1456-1481.
32. Kristjánsdóttir, H., & Óskarsdóttir, S. (2020). EU-country and non-EU-country at the time of crisis: Foreign direct investment. Baltic Journal of Economic Studies, 6(3), 19-23.
33. Le, T. H., Chang, Y. & Park, D. (2016). Trade openness and environmental quality: International evidence, Energy Policy, Volume 92, Pages 45-55, ISSN 0301-4215, https://doi.org/10.1016/j.enpol.2016.01.030.
34. Liu, Y., Sadiq, F., Ali, W. & Kumail, T. (2022). Does tourism development, energy consumption, trade openness and economic growth matters for ecological footprint: Testing the Environmental Kuznets Curve and pollution haven hypothesis for Pakistan, Energy, Volume 245, 123208, ISSN 0360-5442, https://doi.org/10.1016/j.energy.2022.123208.
35. Mabey, N. & McNally, R. (1999). Foreign Direct Investment and the Environment: from Pollution Havens to Sustainable Development; A WWF-UK Report; World Wildlife Fund: London. UK, 1999
36. Managi, S. & Kumar, S. (2009). Trade-induced technological change: Analyzing economic and environmental outcomes, Economic Modelling, Volume 26, Issue 3, Pages 721-732, ISSN 0264-9993, https://doi.org/10.1016/j.econmod.2009.02.002.
37. Musah, M., Mensah, I.A., Alfred, M., Mahmood, H., Murshed, M., Omari-Sasu, A. Y., Boateng, F., Nyeadi, J. D. & Coffie, C. P. K (2022). Reinvestigating the pollution haven hypothesis: the nexus between foreign direct investments and environmental quality in G-20 countries. Environ Sci Pollut Res 29, 31330–31347 . https://doi.org/10.1007/s11356-021-17508-0
38. Nathaniel, S., Aguegboh, E., Iheonu, C., Sharma, G. & Shah, M. (2020). Energy consumption, FDI, and urbanization linkage in coastal Mediterranean countries: re-assessing the pollution haven hypothesis. Environ Sci Pollut Res 27, 35474–35487. https://doi.org/10.1007/s11356-020-09521-6
39. Olasehinde-Williams, G., & Oshodi, A. F. (2021). Global value chains and export growth in South Africa: evidence from dynamic ARDL simulations. Transnational Corporations Review. https://doi.org/10.1080/19186444.2021.1959833.
40. Ozcan B. & Ozturk, I. (2019). Renewable energy consumption-economic growth nexus in emerging countries: a bootstrap panel causality test. Renew Sust Energ Rev 104:30–37
41. Özkan, O. (2021). Döviz Piyasalarının Davranışlarını Açıklamada Etkin Piyasalar Hipotezi ile Adaptif Piyasalar Hipotezinin Karşılaştırılması: BRICS-T Ülkeleri Üzerine Ampirik Bir Çalışma. Muhasebe ve Finansman Dergisi, (89), 221-236.
42. Pesaran, M. H., Shin, Y., & Smith, R. J. (2001). Bounds testing approaches to the analysis of level relationships. Journal of Applied Econometrics, 16(3), 289-326.
43. Phillips, P. C. B, & Perron, P. (1988). Testing for a unit root in time series regression. Biometrika, 75(2), 335-346. Rafindadi AA & Ozturk, I. (2017). Impacts of renewable energy consumption on the German economic growth: Evidence from combined cointegration test. Renew Sust Energ Rev 75:1130–1141
44. Rehman, M. U. & Rashid, M. (2017). Energy consumption to environmental degradation, the growth appetite in SAARC nations, Renewable Energy, Volume 111, Pages 284-294, ISSN 0960-1481, https://doi.org/10.1016/j.renene.2017.03.100.
45. Roshan, S. A., Adinehvand, Z. & Sobhani, M. (2021). Foreign direct investment, trade openness, energy consumption and CO2 emission: evidence from Iran and Saudi Arabia, International Journal of Sustainable Economy, 12(4), 383-402.
46. 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. Environ Sci Pollut Res 27, 31527–31542. https://doi.org/10.1007/s11356-020-09302-1
47. Sarkodie, S. A. & Strezov, V. (2019). Effect of foreign direct investments, economic development and energy consumption on greenhouse gas emissions in developing countries, Science of The Total Environment, Volume 646, Pages 862-871, ISSN 0048-9697, https://doi.org/10.1016/j.scitotenv.2018.07.365.
48. Shahabad, R. D., & Balcilar, M. (2022). Modelling the Dynamic Interaction between Economic Policy Uncertainty and Commodity Prices in India: The Dynamic Autoregressive Distributed Lag Approach. Mathematics, 10(10), 1638. https://doi.org/10.3390/math10101638.
49. 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, Volume 51, Pages 275-287, ISSN 0140-9883, https://doi.org/10.1016/j.eneco.2015.06.014.
50. Solarin, S. A., Al-Mulali, U., Musah, I. & Ozturk, I. (2017). Investigating the pollution haven hypothesis in Ghana: An empirical investigation, Energy, Volume 124, Pages 706-719, ISSN 0360-5442, https://doi.org/10.1016/j.energy.2017.02.089.
51. Tachie, A.K., Xingle, L., Dauda, L., Mensah, C.N., Appiah-Twum, F. & Mensah, I. A. (2020). . The influence of trade openness on environmental pollution in EU-18 countries. Environ Sci Pollut Res 27, 35535–35555 . https://doi.org/10.1007/s11356-020-09718-9
52. Tiba, S. & Belaid, F. (2020). The pollution concern in the era of globalization: Do the contribution of foreign direct investment and trade openness matter?, Energy Economics, Volume 92, 104966, ISSN 0140-9883, https://doi.org/10.1016/j.eneco.2020.104966.
53. Udeagha, M. C., & Ngepah, N. (2021). Disaggregating the environmental effects of renewable and non-renewable energy consumption in South Africa: fresh evidence from the novel dynamic ARDL simulations approach. Economic Change and Restructuring. https://doi.org/10.1007/s10644-021-09368-y.
54. Usman, M., Kousar, R., Makhdum, M.S.A., Yaseen, M. R. & Nadeem, A. M. (2022). Do financial development, economic growth, energy consumption, and trade openness contribute to increase carbon emission in Pakistan? An insight based on ARDL bound testing approach. Environ Dev Sustain . https://doi.org/10.1007/s10668-021-02062-z
55. Wang, Q. & Wang, L. (2021). How does trade openness impact carbon intensity?, Journal of Cleaner Production, Volume 295, 126370, ISSN 0959-6526, https://doi.org/10.1016/j.jclepro.2021.126370.
56. Wang S, Wang H, & Sun Q. (2020). The Impact of Foreign Direct Investment on Environmental Pollution in China: Corruption Matters. Int J Environ Res Public Health. 2020 Sep 5;17(18):6477. doi: 10.3390/ijerph17186477.
57. Waqih, M. A. U., Bhutto, N. A., Ghumro, N.H., Kumar, S. & Salam, M. A. (2019). Rising environmental degradation and impact of foreign direct investment: An empirical evidence from SAARC region, Journal of Environmental Management, Volume 243, Pages 472-480, ISSN 0301-4797, https://doi.org/10.1016/j.jenvman.2019.05.001.
58. Yao S, Zhang S & Zhang, X. (2019) Renewable energy, carbon emission and economic growth: a revised environmental Kuznets Curve perspective. J Clean Prod 235:1338–1352
59. 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. Environ Sci Pollut Res, 28, 52295–52305 . https://doi.org/10.1007/s11356-021-14463-8