Foreign Direct Investment and Economic Growth Impact Renewable Energy Consumption Globally

Strategic Insights -

A recent study conducted by the Graduate School has uncovered a significant relationship between foreign direct investment, economic growth, and renewable energy consumption worldwide. The research analyzed data from 110 countries between 1990 and 2020, concluding that foreign direct investment and economic growth have a U-shaped impact on renewable energy consumption globally. The findings also suggest that the interaction between foreign direct investment and economic growth affects renewable energy consumption, aligning with the trade-off theory and race-to-the-bottom hypothesis, but not supporting the conservation hypothesis.

Key Takeaways:

  • The study used the Dynamic System Generalized Method of Moments to examine data from 110 countries from 1990 to 2020, revealing a U-shaped relationship between Foreign Direct Investment (FDI) and renewable energy consumption globally.
  • The research found that the interaction between FDI and economic growth affects renewable energy consumption, contradicting the conservation hypothesis.
  • The study's findings align with the trade-off theory and race-to-the-bottom hypothesis, suggesting that FDI and economic growth may lead to increased renewable energy consumption in some cases.
  • Policymakers can use these findings to design policies that motivate renewable energy consumption globally.
  • The study's authors, Tuan Van Tran and Hoi Vu Le, along with Trang Ngoc Doan Tran and Khoa Dang Duong, contributed to the research.

Statistics:

  • 110 countries were analyzed in the study between 1990 and 2020.
  • The Dynamic System Generalized Method of Moments was used to examine data from the 110 countries.
  • The research found a U-shaped relationship between FDI and renewable energy consumption globally.
  • The interaction between FDI and economic growth affects renewable energy consumption, with a significant impact on global consumption.

Sources:

  • How foreign direct investment and economic growth affect renewable energy consumption globally: insights from dynamic panel estimators. Social Sciences and Humanities Open, 2025, 12(): 101713. (Elsevier)
  • https://doi-org.sdpl.idm.oclc.org/10.1016/j.ssaho.2025.101713