Does climate finance and foreign capital inflows drive de-carbonisation in developing economies?

Sustainable development requires high investment, and developing economies need external aid to afford it. Developed economies are committed to providing financial support to fight climate change to those with fewer resources suffering the severest consequences. Climate finance consists of financial activities focusing on mitigating and adapting to climate change effects. In this paper, two critical perspectives were addressed: the role of climate finance on environmental degradation and human development and climate finance determinants. This research compiled a panel covering 36 developing economies from 2001 to 2019. Panel-corrected Standard Errors and Feasible Generalized Least Squares estimators were applied. The Seemingly Unrelated Regressions method was carried out to provide robustness of the empirical findings. The empirical results show that climate finance contributes to environmental degradation mitigation, and this effect is more notable in lower-middle-income countries. In these countries, regulatory quality contributes to environmental quality. Moreover, climate finance and human development have a positive bilateral relationship. However, the results suggest that foreign capital inflow slows down human development. These findings provide useful information for policymakers to design and implement environmental policies and strategies to maximize the allocation of climate finance funds and thus help to improve environmental quality.

The evolution of the environmental Kuznets curve hypothesis assessment: A literature review under a critical analysis perspective.

Environmental changes based on factors like urbanization, population, economic growth, increase in energy consumption, and agricultural intensification are never far from the top of any agenda. The topics of environmental degradation and climate change cannot be confined to a single country or region but need to be addressed on a global scale. If the focus is on the relationship between environmental degradation and economic growth, then one hypothesis that is comprehensively used as an empirically model is the widely known Environmental Kuznets Curve. A substantial amount of research has been published about the Environmental Kuznets Curve, and this present study provides a detailed and extensive literature review of more than 200 articles from 1998 to 2022 to explain and assess its evolution. This literature review provides in detail the Environmental Kuznets Curve relationship under analysis, the additional variables included, the type of analysis and methods performed, the relationships obtained, and if the turning point is calculated. Furthermore, this comprehensive literature points out critical issues and gaps in the Environmental Kuznets Curve analysis. It is important to note that there are components that are not considered in the Environmental Kuznets Curve analysis. The Environmental Kuznets Curve only focuses on production and overlooks the impact of the consumption of imported goods on the environment. Consequently, environmental improvements from technological progress will be offset, and economic growth will result in more environmental degradation. This goes against the change in consumer behaviour which occurs with a rise in income, which is one basic assumption of the Environmental Kuznets Curve. The relocation of pollutant industries and consequent relocation of emissions could distort the emissions trajectory over the economic growth path and is also not considered in the Environmental Kuznets Curve analysis. On the other hand, the growth path traced by the inverted U-shaped is not efficient, and the environmental damage provoked in the first phases of the EKC might not be repairable. Therefore, technological progress, climate finance, and energy transition could improve the Environmental Kuznets Curve assessment.

Is the Relocation of Polluting Industries Prompted by FDI Flow and Stock, Globalisation, Corruption and Regulation?

Can globalisation and foreign direct investment shape sustainable development? Foreign direct investment is one of the main drivers for the transfer of polluting industries. With this in mind, the main objective of this research is to identify the role played by foreign direct investment (flow and stock), globalisation (de jure and de facto), corruption and regulatory quality in environmental degradation and sustainable development. To accomplish this objective, and to link the relationships under analysis to the level of development, a comparison between a group of developing countries and a group of developed ones was performed. The results confirm the suitability of the division of the countries by revealing various effects. This analysis was conducted from 1996 to 2017 and by recurring to the Autoregressive Distributed Lag model. This study proves that foreign investors play a vital role in reaching sustainable development. Measures must be implemented to eliminate the distortions that cause a company based in a country with strict environmental regulations to relocate its production to one with lax environmental regulations. However, these measures need to be combined with complementary measures that encourage developing economies to agree to a possible slowdown in their economic growth if sufficiently compensated for this reduced growth.