Investigating the Relationship between ASEAN's Carbon Emissions and Foreign Direct Investment: A Road to Sustainable Growth

Abstract: In order to promote sustainable development and lessen environmental deterioration, understanding the underlying factors that contribute to environmental degradation and lowering carbon footprints are now more important than ever. This study therefore examines how environmental policies have affected FDI inflow and carbon emission reduction in the ASEAN from 2000 to 2022. Applying the panel smooth transition regression model, the results demonstrated that there is no linear link between the two variables. Additionally, it illustrates that while foreign direct investment increases carbon emissions when the economy is in a low regime, the connection between the two variables changes as the economy moves to a high regime and turns negative and significant. The study also demonstrates that once Carbon emission exceeds a specific threshold, FDI can diminish it. On the basis of these findings, fresh policymakers' insights are offered, and many proposals for policies to enhance ASEAN's environmental quality are made. Additionally, it is recommended that Carbon emission and Foreign direct investment be taken into account while creating sustainable environmental policy.

Keywords: Sustainable Development, Institutional Quality, Foreign Direct Investment, Carbon Emission