Evaluating the Dual Impact of Economic Drivers on Environmental Degradation in Developing Countries: A Study of Technology Innovation, Foreign Direct Investment, and Trade Openness

Abstract

The current research examines the impacts of Technology Innovation, Foreign Direct Investment, Trade Openness, and Globalization on environmental degradation, specifically through Carbon Dioxide emissions, from 1999 to 2023 in developing countries. Utilizing the Autoregressive Distributed Lag method, the study identifies both long-term and short-term relationships between Carbon Dioxide emissions and their influencing factors. Additionally, a Granger causality test was conducted to establish the causative directions among these variables. The findings reveal that Technology Innovation and Globalization significantly exacerbate environmental degradation. Conversely, Trade Openness and Foreign Direct Investment appear to have a substantial but negative impact on environmental degradation. The study advises developing nations to adopt sustainable trading practices that integrate environmental considerations into trade agreements and national laws. Such practices might involve the promotion of eco-friendly product labels, support for sustainable supply chains, and the reduction of trade barriers for environmentally beneficial goods. Moreover, the research underscores the necessity of aligning economic policies with environmental protection to promote economic growth while mitigating Carbon Dioxide emissions. This balanced approach can help developing countries advance toward sustainable development. The insights provided are crucial for policymakers aiming to balance economic growth with environmental sustainability, supporting the broader Sustainable Development Goals. Overall, this study offers a strategic framework for understanding the interplay between economic and technological influences and environmental conditions, guiding sustainable policymaking in developing regions.