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Testing the pollution haven hypothesis for CO<inf>2</inf> emissions: A common correlated effects (CCE) approach

Abstract:

The aim of this research is to investigate the Pollution Haven Hypothesis (PHH) from 15 countries, spanning the period 1970-2014, utilising CO2 emissions as an indicator of air pollution. Moreover, we utilised Gross Domestic Product (GDP), GDP square, energy consumption, fossil fuel energy consumption, foreign direct investment and trade openness as its main determinants. The evidence from panel cointegration methodologies indicates the existence of long-run relationships between the variables. Moreover, GDP square, energy consumption and fossil fuel energy consumption have positive impact on CO2 emissions, while GDP, foreign direct investment and trade openness decrease emissions in the selected countries. This indicates that PHH holds in 3 out of the 15 countries. A number of policy recommendations were provided according to the results obtained.