The Nexus Between Economic Growth, Foreign Direct Investment, Renewable Energy and Ecological Footprint in Malaysia

The growing human demand for biologically productive land and ocean areas significantly affects nature’s ability to restore its ecosystems. Therefore, this study aims to examine the impact of economic growth, foreign direct investment (FDI), and renewable energy usage on Malaysia’s ecological footprint from 1970 to 2018 using the environmental Kuznets curve model. The data was analysed using unit root tests, autoregressive distributed lag (ARDL), and the Granger causality test. The results suggest that increased economic growth and FDI have a negative impact on environmental quality, both in the short term and the long term. Moreover, a rise in the utilisation of renewable energy enhances the extent of environmental deterioration. The analysis further confirms the validity of the environmental Kuznets curve hypothesis, which suggests that the relationship between economic growth and environmental quality in Malaysia follows an inverted U-shaped pattern. The results of the Ganger causality test indicate a unidirectional relationship between economic growth and ecological footprint, as well as a unidirectional association between ecological footprint and renewable energy. These findings offer valuable information to policymakers about the promotion of renewable energy consumption and the impact of foreign direct investment on the sustainable development of the host country.