Examining the emissions-growth nexus: carbon impact, economic expansion, FDI, globalization, and trade in leading economies

This study seeks to validate the Environmental Kuznets Curve (EKC) hypothesis through an analysis of the effects of CO2 emissions, economic growth, foreign direct investment (FDI), globalization, and trade among the ten largest economies in the world, covering the period from 1981 to 2022. To test and quantify economic phenomena in both short- and long-term periods, this study utilized heterogeneous panel data estimation. The EKC hypothesis is supported by the estimates, which show a positive link between GDP and CO2 emissions, and an inverted U-shaped effect for the overall panel estimates. Except for India, all the largest economies accept the EKC hypothesis when examining the Sasabuchi–Lind–Mehlum (SLM) test. The causality test reveals that trade openness and CO2 emission are both reciprocal, while globalization, investment, economic growth, and CO2 emission are all mutually exclusive. The empirical results of the research have shown that there are significant policy implications that need to be addressed, resulting in the possibility of achieving a green economic conditions for the world's largest economies in the future.