Long-Run Dynamics of Gas Emissions, Economic Growth, and Low-Carbon Energy in the European Union: The Fostering Effect of FDI and Trade

The European Union’s environmental goal by 2050 is to become the first climate-neutral continent in world. This means specific efforts for diversifying energy mix and investing low-carbon energy. Our study investigates nexus among carbon emissions, consumption mix, economic growth a modified framework that includes contribution of inward foreign direct investments international trade lowering air pollution. We have used two-step approach explore more detail links between these variables 24 EU countries over period 1995–2018, followed panel VECM analysis. results indicate there unidirectional link CO2 which should imply decoupling improvement measures from pace growth. also find bidirectional causal relationships shares as well share GDP per capita, confirms both pollution haven halo effect hypotheses FDI on gas emissions. However, long term, FDI, exports, imports positively impacted reduction emissions; therefore, stronger investment integration be promoted improve quality environment.