The environmental impact of industrialization and foreign direct investment: empirical evidence from Asia-Pacific region

Abstract

Environmental degradation has been the main distress in recent years due to the drastic effect of climate change. To determine the gone thorough impact of industrialization and foreign direct investment on environmental degradation, this study utilized panel data of 55 countries of the Asia-Pacific region from 1995 to 2020 and it applies an autoregressive distributed lag (ARDL) model. The results showed that FDI, in general, has a significant negative impact on the environment and causes to increase in methane and CO2 emissions. Moreover, industrialization has a positive and significant impact on the environment. However, the size of the impact is moderate. This study also concludes that in the Asia-Pacific region, the environment Kuznets curve (EKC) and pollution heaven (PH) hypothesis are accepted. Finally, this study suggests the strict implication of environmental guidelines or the adoption of a new policy would be the key to ensuring the quality of the environment. Furthermore, the results confirmed that most of the panel countries are developing countries and do not have strict environmental management guidelines.