Pollution haven hypothesis and EKC dynamics: moderating effect of FDI. A study in Shanghai Cooperation Organization countries

Abstract This paper provides a comprehensive analysis of the nexus between economic growth and environmental degradation, with a specific focus on carbon dioxide (CO 2 ) emissions. It leverages a dataset spanning from 1991 to 2021, encompassing all 12 member nations of the Shanghai Cooperation Organization (SCO). The investigation includes a wide array of statistical examinations, such as stationarity tests, cross-section dependence, and co-integration analysis. The Johansen Fisher Panel co-integration test is employed to reveal long-term correlations between the variables. Furthermore, the paper adopts the Dumitrescu and Hurlin panel causality model, which accommodates variations in causal relationships across different countries. Additionally, the study analyses the asymmetric impact of GDP on carbon emissions across various quantiles using quantile regression. The findings of this research yield valuable insights, highlighting a significant positive correlation between GDP and CO 2 emissions, suggesting that higher income levels are associated with greater pollution. However, the paper also illuminates more intricate scenarios, such as those characterized by inverted U-shaped and N-shaped Environmental Kuznets Curve (EKC) patterns, revealed through DOLS estimations. These estimations consider FDI, inflation, and industrialization as control variables. This research delves into the Pollution Haven Hypothesis and examines the interaction effects of FDI with other considered variables. These insights contribute to a deeper understanding of the complex dynamics between economic growth and environmental impact within the SCO member nations.