This study investigates the impact of foreign capital inflows (official development assistance, foreign direct investment, and remittances), economic growth, renewable energy consumption (REC), and governance on greenhouse gas (GHG) emissions in 70 developing economies from 2001 to 2019. By incorporating multiple sources of foreign capital and utilizing governance effectiveness as a governance indicator, the study provides a nuanced analysis of their individual and interactive effects on climate change mitigation. Using the system Generalized Method of Moments, along with robustness checks through pooled ordinary least squares and instrumental variable regression, the findings reveal that official development assistance, foreign direct investment (FDI), and effective governance significantly reduce GHG emissions. In contrast, REC and remittances are associated with increased emissions. However, the synergistic interaction of all four variables—foreign capital inflows, governance, REC, and gross domestic product—demonstrates a net positive effect on mitigating climate change. These results underscore the importance of channeling well-governed capital flows toward renewable energy and sustainable development. Policymakers should strategically allocate official development assistance and attract FDI to renewable energy projects while enhancing governance to ensure accountability and sustainability. Mechanisms must be developed to direct remittance flows toward climate resilience and clean energy adoption. Governments should invest in governance reforms and renewable energy technologies to foster decarbonization and improve institutional capacity. Renewable energy must be integrated into national economic strategies, supported by innovation and green investment incentives. Developing economies should build robust legal and institutional structures to support practical and science-based climate action.
AliSXuHAhmadN. Reviewing the strategies for climate change and sustainability after the US defiance of the Paris agreement: an AHP–GMCR-based conflict resolution approach. Environ Dev Sustain2021; 23: 11881–11912.
2.
AliSBakarAAbdulB, et al.Environmental impacts of international tourism : examining the role of policy uncertainty, renewable energy, and service sector output. Environ Sci Pollut Res2023; 31: 46221–46234.
3.
ChenZHeJ. Foreign aid for climate change related capacity building. WIDER Working Paper 46/2013, Helsinki, 2013.
4.
DraboA. How do climate shocks affect the impact of FDI, ODA and remittances on economic growth? Authorized for distribution. 2021. WP/21/193.
5.
World Bank. World development indicators 2022. Washington, D. C.2022.
6.
HuangHAliSSolangiYA. Analysis of the impact of economic policy uncertainty on environmental sustainability in developed and developing economies. Sustainability2023; 15: 5860.
7.
RognerH-H. The effectiveness of foreign aid for sustainable energy. 2013. WIDER Working Paper No. 2013/055. Epub ahead of print 2013. DOI: https://doi.org/10.2/JQUERY-UI.MIN.JS.
8.
ChungDHwangJ. An economic and social impact of international aid at national level: Application of spatial panel model. World2022; 3: 575–585.
9.
SharmaKBhattaraiBAhmedS. Aid, growth, remittances and carbon emissions in Nepal. Energy J2019; 40: 129–141.
10.
FarooqU. Foreign direct investment, foreign aid, and CO2 emissions in Asian economies: does governance matter?Environ Sci Pollut Res Int2022; 29: 7532–7547.
11.
AlsalehMAbdul-RahimAS. Rethinking the governance of geothermal power industry: The roadmap for sustainable development. Energy Explor Exploit2023; 41: 1821–1849.
12.
AlsalehMAbdul-RahimAS. Unveiling the impacts of geothermal energy growth on food security in EU27 region: an empirical analysis. Environ Sci Pollut Res2023; 30: 24654–24671.
13.
WangXAlsalehM. Determinants of geothermal power sustainability development: do global competitiveness markets matter?Sustainability2023; 15: 3747.
14.
AlsalehMWangX. How does information and communication technology affect geothermal energy sustainability?Sustainability2023; 15: 1071.
15.
AlsalehMYangZChenT, et al.Moving toward environmental sustainability: assessing the influence of geothermal power on carbon dioxide emissions. Renew Energy2023; 202: 880–893.
16.
AlsalehMChenTAbdul-RahimAS. A revisit to the relationship between geothermal energy growth and underground water quality in EU economies. Environ Technol (United Kingdom). 2022; 45: 1271–1289.
17.
AlsalehMAbdul-RahimAS. Toward a sustainable environment: nexus between geothermal energy growth and land use change in EU economies. Environ Sci Pollut Res2023; 30: 24223–24241.
18.
CaetanoRVMarquesACAfonsoTL. How can foreign direct investment trigger green growth? The mediating and moderating role of the energy transition. Economies2022; 10: 199.
19.
CopelandBRTaylorMS. North-South trade and the environment. Q J Econ1994; 109: 755–787.
20.
LeeJW. The contribution of foreign direct investment to clean energy use, carbon emissions and economic growth. Energy Policy2013; 55: 483–489.
21.
StavropoulosSWallRXuY. Environmental regulations and industrial competitiveness: evidence from China. Appl Econ2018; 50: 1378–1394.
22.
WangYHuangY. Impact of foreign direct investment on the carbon dioxide emissions of East Asian countries based on a panel ARDL method. Front Environ Sci2022; 10: 878.
23.
KhanMAOzturkI. Examining foreign direct investment and environmental pollution linkage in Asia. Environ Sci Pollut Res Int2020; 27: 7244–7255.
24.
KablanSChouardV. Does climate aid matter for reducing CO2 emissions? The case of foreign aid for renewable energy. Appl Econ2022; 54: 5357–5372.
25.
OmriABel HadjT. Foreign investment and air pollution: Do good governance and technological innovation matter?Environ Res2020; 185: 109469.
26.
SarkodieSAAdamsSLeirvikT. Foreign direct investment and renewable energy in climate change mitigation: does governance matter?J Clean Prod2020; 263: 121262.
27.
XuCZhaoWZhangM, et al.Pollution haven or halo? The role of the energy transition in the impact of FDI on SO2 emissions. Sci Total Environ2021; 763: 143002.
28.
GiulianoPRuiz-ArranzM. Remittances, financial development, and growth. J Dev Econ2009; 90: 144–152.
29.
DePKRathaD. Impact of remittances on household income, asset and human capital: evidence from Sri Lanka. Migr Dev2012; 1: 163–179.
30.
AmegaK. Remittances, education and health in Sub-Saharan Africa. Cogent Econ Financ2018; 6: 1–27.
DashRK. Impact of remittances on domestic investment: a panel study of six South Asian countries. South Asia Econ J2020; 21: 7–30.
33.
AhmadWOzturkIMajeedMT. How do remittances affect environmental sustainability in Pakistan? Evidence from NARDL approach. Energy2022; 243: 122726.
34.
AhmadMUl HaqZKhanZ, et al.Does the inflow of remittances cause environmental degradation? Empirical evidence from China. Econ Res Istraz2019; 32: 2099–2121.
35.
YangBJahangerAAliM. Remittance inflows affect the ecological footprint in BICS countries: do technological innovation and financial development matter?Environ Sci Pollut Res2021; 28: 23482–23500.
36.
EdwardsT. Remittance flows and the environmental degradation–migration nexus. J Popul Sustain2022; 6: 31–48.
37.
BrownLMcFarlaneACampbellK, et al.Remittances and CO2 emissions in Jamaica: an asymmetric modified environmental Kuznets curve. J Econ Asymmetries2020; 22: e00166.
38.
ZhaoLQamruzzamanM. Do urbanization, remittances, and globalization matter for energy consumption in belt and road countries: evidence from renewable and non-renewable energy consumption. Front Environ Sci2022; 10: 723.
39.
RahmanMMHosanSKarmakerSC, et al.The effect of remittance on energy consumption: panel cointegration and dynamic causality analysis for South Asian countries. Energy2021; 220: 119684.
40.
SubramaniamYMasronTALoganathanN. Remittances and renewable energy: an empirical analysis. Int J Energy Sect Manag. 2022; 17: 1034–1049.
41.
BokpinGA. Foreign direct investment and environmental sustainability in Africa: the role of institutions and governance. Res Int Bus Financ2017; 39: 239–247.
42.
KhurshidNSharifHTabashMI, et al.Analyzing the impact of foreign capital inflows and political economy on economic growth: an application of regime switching model. Economies2023; 11: 181.
BenzerroukZAbidMSekrafiH. Pollution haven or halo effect? A comparative analysis of developing and developed countries. Energy Reports2021; 7: 4862–4871.
45.
ErgunSJOwusuPARivasMF. Determinants of renewable energy consumption in Africa. Environ Sci Pollut Res2019; 26: 15390–15405. 2019 2615.
46.
AsonguSAOdhiamboNM. Governance, CO2 emissions and inclusive human development in sub-Saharan Africa. Energy Explor Exploit2020; 38: 18–36.
47.
BoyceSHeF. Political governance, socioeconomics, and weather influence provincial GHG emissions in Canada. Energy Policy2022; 168: 113019.
ArvinMBDabir-AlaiPLewB. Does foreign aid affect the environment in developing economies?J Econ Dev2006; 31: 63–87.
53.
KretschmerBHüblerMNunnenkampP. Does foreign aid reduce energy and carbon intensities of developing economies?J Int Dev2013; 25: 67–91.
54.
BolyM. CO2 mitigation in developing countries: the role of foreign aid. Études et Documents no. 1, Clermont-Ferrand, https://halshs.archives-ouvertes.fr/halshs-01740881 (22 March 2018, accessed 28 October 2022).
55.
MahalikMKVillanthenkodathMAMallickH, et al.Assessing the effectiveness of total foreign aid and foreign energy aid inflows on environmental quality in India. Energy Policy2021; 149: 112015.
56.
LeeSKChoiGLeeE, et al.The impact of official development assistance on the economic growth and carbon dioxide mitigation for the recipient countries. Environ Sci Pollut Res2020; 27: 41776–41786.
57.
HuangYChenFWeiH, et al. The impacts of FDI inflows on carbon emissions: economic development and regulatory quality as moderators. Front Energy Res2022; 9. DOI: https://doi.org/10.3389/fenrg.2021.820596
58.
KisswaniKMZaitouniM. Does FDI affect environmental degradation? Examining pollution haven and pollution halo hypotheses using ARDL modelling. J Asia Pacific Econ2021: 1–27.
59.
SimionescuMSzelesMRGavurovaB, et al.The impact of quality of governance, renewable energy and foreign direct investment on sustainable development in Cee countries. Front Environ Sci2023; 9: 27.
60.
RathaDMohapatraSOzdenC, et al. Leveraging Migration for Africa : Remittances, Skills, and Investments. Washington, DC: World Bank. Epub ahead of print 26 April 2011. DOI: https://doi.org/10.1596/978-0-8213-8257-8.
61.
NeogYYadavaAK. Nexus among CO2 emissions, remittances, and financial development: a NARDL approach for India. Environ Sci Pollut Res2020; 27: 44470–44481. 2020 2735.
62.
MensahBDAbdul-MumuniA. Asymmetric effect of remittances and financial development on carbon emissions in sub-Saharan Africa: an application of panel NARDL approach. Int J Energy Sect Manag2022; 17: 865–886.
LealPHMarquesACShahbazM. Does climate finance and foreign capital inflows drive de-carbonisation in developing economies?J Environ Manage2023; 347. Epub ahead of print 2023. DOI: https://doi.org/10.1016/j.jenvman.2023.119100
65.
SarkodieSAStrezovV. Effect of foreign direct investments, economic development and energy consumption on greenhouse gas emissions in developing countries. Sci Total Environ2019; 646: 862–871.
66.
ZardoubASbouiF. Impact of foreign direct investment, remittances and official development assistance on economic growth: panel data approach. PSU Res Rev2023; 7: 73–89.
67.
NuţăFMSharafatAAbbanOJ, et al.The relationship among urbanization, economic growth, renewable energy consumption, and environmental degradation: a comparative view of European and Asian emerging economies. Gondwana Res2024; 128: 325–339.
68.
ZhangHJingZAliS, et al.Renewable energy and natural resource protection: unveiling the nexus in developing economies. J Environ Manage2024; 349: 119546.
69.
ChenXHTeeKElnahassM, et al.Assessing the environmental impacts of renewable energy sources: A case study on air pollution and carbon emissions in China. J Environ Manage2023; 345: 118525.
70.
ShahbazMSinhaARaghutlaC, et al.Decomposing scale and technique effects of financial development and foreign direct investment on renewable energy consumption. Energy2022; 238: 121758.
71.
KwakwaPA. Climate change mitigation role of renewable energy consumption: does institutional quality matter in the case of reducing Africa’s carbon dioxide emissions?J Environ Manage2023; 342: 118234.
72.
RoodmanD. How to do xtabond2: an introduction to difference and system GMM in Stata. Stata J2009; 9: 86–136.
73.
ArellanoMBondS. Some tests of specification for panel data: Monte Carlo evidence and an application to employment equations. Rev Econ Stud1991; 58: 277–297.
74.
ArellanoMBoverO. Another look at the instrumental variable estimation of error-components models. J Econom1995; 68: 29–51.
75.
BlundellRBondS. Initial conditions and moment restrictions in dynamic panel data models. J Econom1998; 87: 115–143.
76.
FukaseE. Revisiting linkages between openness, education and economic growth: system GMM approach. J Econ Integr2010; 25: 194–223.
77.
AnjumSFarooqFChaudhryIS, et al.Analyzing the effect of foreign capital movements on human development in developing countries: a system GMM approach. Int J Manag Res Emerg Sci2022; 12: 37–70.
78.
Dinh SuTPhuc NguyenC. Foreign financial flows, human capital and economic growth in African developing countries. Int J Financ Econ2022; 27: 3010–3031.
79.
TchamyouVSAsonguSA. Information sharing and financial sector development in Africa. J African Bus2017; 18: 24–49.
80.
AsonguSAcha-AnyiPN. The murder epidemic: A global comparative study. No. WP/17/059, Yaoundé, 2017.
81.
AsonguSALe RouxSBiekpeN. Environmental degradation, ICT and inclusive development in Sub-Saharan Africa. Energy Policy2017; 111: 353–361.
82.
AsonguSAOdhiamboNM. Economic development thresholds for a green economy in Sub-Saharan Africa. Energy Explor Exploit2020; 38: 3–17.
83.
TchamyouVSErreygersGCassimonD. Inequality, ICT and financial access in Africa. Technol Forecast Soc Change2019; 139: 169–184.
84.
BreuschPPaganAR. A simple test for heteroscedasticity and random coefficient variation. Econometrica1979; 47: 1287–1294.
85.
CookRDWeisbergS. Diagnostics for heteroscedasticity in regression. Biometrika1983; 70: 1–10.
86.
BaumCFSchafferMEStillmanS. Instrumental variables and GMM: estimation and testing. Stata J2003; 3: 1–31.
87.
NanNHeGSolangiYA, et al.Comparative analysis of the impact of policy uncertainty, agricultural output, and renewable energy on environmental sustainability. Sustainability2023; 15: 8787.
LiDDRishiMBaeJH. Green official development aid and carbon emissions: do institutions matter?Environ Dev Econ2021; 26: 88–107.
93.
SiebertH. Environmental quality and the gains from trade. Kyklos1977; 30: 657–673.
94.
BamatiNRaoofiA. Development level and the impact of technological factor on renewable energy production. Renew Energy2020; 151: 946–955.
95.
DasAMcFarlaneAJungYC. Remittances and GDP in Jamaica: an ARDL bounds testing approach to cointegration. Int Econ J2019; 33: 365–381.
96.
RahmanZUCaiHAhmadM. A New Look at the Remittances-FDI- Energy-Environment Nexus in the Case of Selected Asian Nations. Singapore Econ Rev. 2023; 68: 157–175.
97.
GökASodhiN. The environmental impact of governance: a system-generalized method of moments analysis. Environ Sci Pollut Res2021; 28: 32995–33008.
98.
YasmeenHTanQAliS, et al.Managing environmental quality in Pakistan through sustainable development of energy–economy–environment (3E): insights from graph model of conflict resolution (GMCR). Manag Environ Qual An Int J2021; 32: 1095–1111.
