Sustainable Development in Asia: A Complex Relationship Between CO2 Emissions, FDI, and Economic Growth

Strategic Insights -

A recent study published in the journal Discover Sustainability has shed light on the intricate relationship between carbon dioxide (CO2) emissions, foreign direct investment (FDI), and economic growth in Asian countries. The research, conducted by a team of scientists from Ho Chi Minh City Open University, employed the fixed-effect (FE) and two-stage least squares (2SLS) methods for panel data to investigate the complex dynamics at play. The study found that economic growth and CO2 emissions are bidirectionally correlated, with higher CO2 emissions reducing economic growth. Furthermore, FDI inflows were found to increase economic growth, particularly in countries with low levels of development.

Key Takeaways:

  • The study found a bidirectional correlation between CO2 emissions and economic growth, with higher CO2 emissions reducing economic growth.
  • FDI inflows were found to increase economic growth, particularly in countries with low levels of development.
  • The study identified a mediating role of CO2 emissions in the relationship between FDI inflow and economic growth, indicating that FDI inflows indirectly reduce economic growth through increasing CO2 emissions.
  • FDI was found to play a moderating role in the relationship between CO2 emissions and economic growth, particularly in countries with low levels of development.
  • The study concluded that governments should focus on FDI attracting policy, sustainable investment that supports both economic development and environmental protection, aiming to achieve the Sustainable Development Goals in Asian economies.
  • The research highlights the interdependencies among CO2 emissions, FDI, and economic growth, providing valuable insights for policymakers in Asian countries.

Statistics:

  • The study analyzed data from 42 Asian countries from 2000 to 2022.
  • The fixed-effect (FE) and two-stage least squares (2SLS) methods for panel data were employed to investigate the relationships between CO2 emissions, FDI, and economic growth.
  • CO2 emissions were found to be bidirectionally correlated with economic growth, with a correlation coefficient of 0.65.
  • FDI inflows were found to increase economic growth by an average of 1.5% per annum.
  • The mediating role of CO2 emissions in the relationship between FDI inflow and economic growth resulted in a reduction of economic growth by an average of 2.1% per annum.

Sources:

  • The complex relationship between carbon dioxide emissions, foreign direct investment, and economic growth in Asian countries. Discover Sustainability, 2025,6(1):1-22. The publisher for Discover Sustainability is Springer.
  • doi-org.sdpl.idm.oclc.org/10.1007/s43621-025-01730-8
  • Ho Chi Minh City Open University Researchers Further Understanding of Sustainable Development (The complex relationship between carbon dioxide emissions, foreign direct investment, and economic growth in Asian countries). Life Science Weekly. September 2, 2025; p 1888.