The Determinants of Carbon Emissions: Panel Quantile Regression Estimation of the Differential Effects of Foreign Direct Investment, Energy Consumption and Economic Growth

Abstract

This paper estimates the effect of FDI, economic growth and energy consumption on carbon emissions in five ASEAN countries for the period 1981 to 2014. The panel quantile regression estimates show that while the effect of FDI is insignificant, economic growth and energy consumption significantly increase carbon emissions in high-emission ASEAN-5 countries. At higher levels of energy consumption, adaption of green renewable energy and emission control technology mitigate the increase in carbon emissions. The quantile estimates of this paper do not lend support to the U-shaped Environmental Kuznets Curve (EKC) hypothesis. At the same time, the insignificant effect of FDI on carbon emissions does not lend sufficient support to the pollution haven hypothesis in loweremission ASEAN-5 countries. The negative influence of FDI on carbon emissions at the middle quantiles supports the halo effect hypothesis. The estimated quantile results suggest that uniform carbon emissions control policies are unlikely to succeed equally across low-emissions and high-emissions economies.

Keywords: FDI, Energy, Growth, Emissions, Environment, Quantile Regression

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