Does Degree of Stringency Matter? Revisiting the Pollution Haven Hypothesis in BRICS Countries

Abstract

This study aims to demonstrate the validity of the Pollution Haven Hypothesis (PHH) for BRICS nations by revealing the empirical relationship between foreign direct investment (FDI), air pollution, and environmental regulations. At the same time, the study objectives are based on the BRICS′ COP26 goals focused on mobilizing climate finance annually. The SDGs agenda for 2030 seeks to implement effective climate change planning and management. However, the study uses the panel data of BRICS countries from 2000 to 2020. This study has used the PMG/PARDL model to empirically test the existence of PHH in BRICS countries. Therefore, the empirical estimates indicate that an increase in FDI increases environmental degradation. Consequently, the findings confirm the existence of PHH in BRICS. This study demonstrates that at low levels of stringency, the likelihood of pollution-intensive FDIs increases with a decrease in severity. Even though strict regulations may lead to higher pollution-intensive foreign direct investment (FDI), this is not always the case at lower levels of law. This implies that the same pollution activity may be economically and socially unsuitable for developed environments but desirable for less advanced environments. These distinctions are the foundation for the emergence of pollution havens. Therefore, environmental policy laxity must be formed to induce FDI flow into the BRICS countries, further implying SDG’s accomplishment. Furthermore, additional stringent regulations might very well result in FDIs with a more significant environmental impact. This suggests that pollution havens are only possible if environmental rules are lax or inconsequential.

The dynamic relationship among technological innovation, international trade, and energy production

“…The study discovered, all potential factors considerably expand the ecological quality with the exception of financial development. Wen et al (2022) discovers that an upsurge in FDI upturns environmental loss. Subsequently, the results support the presence of (PHH) Pollution Haven hypothesis in BRICS nations.…”

Role of technological innovation, renewable and non-renewable energy, and economic growth on environmental quality. Evidence from African countries

“…There has been an intense debate in the energy and environmental function discourse on the inclusion of urbanization, especially regarding regional and environmental development. However, few works Poumanyvong and Kaneko (2010), , Sheng et al (2017), Lui (2019), Jiang et al (2022), Liu et al (2022), andWen et al (2022) have documented the long relationship between urbanization and energy consumption and environmental quality. analyzed the impact of urbanization on renewable and non-renewable energy consumption in OECD countries using the STIRPAT model and data from 1980 to 2011.…”

Editorial: Export product quality, renewable energy, and sustainable production

“…Consequently, government effectiveness reduces pollution in both the short and long run, whereas corruption control and rule of law contribute to environmental protection in the long term. Due to international cooperation and environmental summits, the global awareness of the SDGs and sustainable investment projects has increased (Wen et al, 2022). Literature indicates that an increase in FDI contributes to environmental damage (Qamruzzaman, 2022).…”

“…Consequently, there is still room for FDI regulation and oversight to make their operations viable. In the literature focusing on investment in renewable energy, the influence of a country's governance structure on liquidity and financial development has been explored (Wen et al, 2022). Investors prefer a country with better governance and a well-developed financial market, resulting in the security of their assets and a positive outlook on the creation of returns (Ahmad and Wu, 2022).…”