ABSTRACT

Developing countries are strongly interested in attracting foreign direct investment to improve the lack of capital and finance economic growth. To do this, they usually implement less stringent environmental policies for foreign investment. However, this strategy comes with the expense of more pollution and environmental disasters in some cases. This study aims to reveal the relationship between foreign investment, growth, and environmental pollution. However, the type of investment matters when it comes to pollution. Thus, we consider the components of foreign investment as greenfield and brownfield investments, where the former is an investment made from scratch and the latter is a purchase of an existing firm. The empirical analysis covers the period between 1990 and 2020. The primary data sources are the World Bank and OECD. We used three VAR models to investigate the effects of greenfield and brownfield investments on carbon emission and growth. We highlight that the change in total foreign direct investment and greenfield variables was statistically significant in explaining the change in CO2 emissions, but brownfield investments were found to be statistically insignificant in explaining CO2 emissions.