Reconsidering the pollution haven hypothesis: an investigation of international trade, foreign direct investment, and carbon emission nexus in Nigeria

Abstract

The interconnectedness among communities globally has heightened environmental concerns because of associated cross-border transactions. As such, we reconsider the impact of international trade (TR) and FDI on CO2 in Nigeria to test the PHH between 1981 and 2020 using the ARDL approach. The study utilises the Lee-Strazicich (L-S) unit root test for a structural break and the Toda-Yamamoto Granger causality test. FDI causes CO2, whereas TR and CO2 influence each other. The ARDL estimates show that TR and FDI reduce CO2 in the short run but positively affect long-run CO2, supporting the long-run PHH. Government regulation positively impacts short-run CO2 while slowing CO2 discharge in the long run. The moderation effect shows that FDI*RQ increases CO2 in the short run and declines pollution in the long run. TR*RQ interaction reduces CO2 in both periods. The study concludes on green technology transfer and improvement in environmental regulations for sustainability drive.