Abstract:
Carbon dioxide (CO₂) is a type of gas that significantly contributes to global warming.
According to the Intergovernmental Panel on Climate Change (IPCC), these emissions are
primarily the result of human activities, including economic ones. This research offers new
insights into how foreign investment and the strength of regulatory systems influence
environmental outcomes, specifically CO₂ emissions, in developed economies. By
examining data from eight OECD countries over the period 2000–2023, the study moves
beyond traditional discussions focused solely on economic growth or trade. Instead, it
highlights the environmental consequences of FDI, trade and regulatory quality. Through a
fixed effects model, we find an immediate impact on CO2 from FDI and regulatory quality
applied; while in the case of trade the evidence suggests that no contemporaneous impact
exists. The results challenge the assumption that stronger regulations always lead to better
environmental outcomes, suggesting that the content and enforcement of those regulations matter greatly. Overall, the study provides practical value for policymakers by emphasizing the need to align investment strategies with environmental goals. It encourages a more integrated approach to economic and environmental policy, where attracting investment goes hand in hand with protecting environmental quality.
