Does Foreign Direct Investment (FDI) have an Impact on CO₂ Emissions in Balkan Countries?

Abstract

This thesis analyzes in an empirical way the impact of Foreign Direct Investments (FDI) on CO2 emissions in Balkan Countries: Albania, Bosnia and Herzegovina, North Macedonia, Croatia, Romania, Bulgaria, Serbia, Greece, Montenegro, Turkey, Slovenia .Despite the geographical location and historical past these countries work on developing their economies and improving different sectors to play a vital role not only within Balkan region but also on a broader scale. Foreign Direct Investments is a crucial topic for developing and transition economies, especially in regions like Balkan countries that are very focused on attracting these foreign investments and contributing to climate actions. The aim of the study is to analyze in an empirical way the impact of FDI inflows on environmental pollution through carbon emissions or alternatively we can study from the results if FDI contribute on greener technologies that reduce pollution levels or not. The research is based on a panel data approach, using annual data from 11 Balkan countries over an 11-year period during 2010-2021. The dependent variable in our model is CO₂ emissions per country, while the main independent variable is FDI inflows (as a percentage of GDP). Other control variables such as industry as a percentage of GDP, renewable energy consumption, and remittances are included to provide comprehensive analysis. The results of the study show a positive relationship between Carbon Dioxide emissions and FDI. Also, there is a positive relationship between Remittances and Caron Dioxide emissions and a negative relationship between Renewable energy and Carbon Dioxide emissions. Analysis shows that there is no statistically significant relationship between Industry and Carbon Dioxide emissions. This research is important because suggest for everyone to contribute on clean investments and offering solutions to have minimal negative impacts on environment.