Foreign direct investment and the environment involves international business and its interaction and impact on the natural world. This interaction can be observed through strict foreign direct investment policies and capital responsiveness or labor incentives for investment entry. Laws and regulations made by state-focused environmental regimes can directly affect the level of competition that involves foreign direct investment they face. Fiscal and financial incentives derived from ecological motivators, such as the carbon tax, are the methods used on the basis of desired outcomes within a country to attract foreign direct investment.
External funding sources derived from foreign direct investment, stimulating the improvement of innovative ideas surrounding technological progress while also holding the potential for reducing unemployment. When fiscal and fiscal motives are combined with environmental awareness, the promotion of green and sustainable innovations is increasing. Such environmental awareness can lead to a reduction in industrial pollutants, which contribute to infant mortality and other health problems. Created policies that attract innovative and environmentally conscious technological advances have been expressed as a great way to drive an increase in the abundance of environmentally friendly foreign direct investment. The Organization for Economic Cooperation and Development promotes policies that can have a positive social and economic impact.
Foreign direct investment does have the potential to initiate negative effects on countries as well. Foreign direct investments enable opportunities to compromise and collaborate between the policies of negotiating countries that bring opportunities for new perspectives on green innovation. However, intensifying regulations around production costs, such as environmental effects, can reduce the attraction of foreign direct investment to the country. Businesses or governments may want to negotiate with countries with less complicated policies thereby reducing a nation's competitive advantage in international markets.
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Environmental Regulations and Foreign Direct Investment Incentives
A full list of foreign direct investment incentives that can be applied in relation to international business can be found in foreign direct investment.
Some researchers find foreign direct investment leading to a strict environmental policy. Environmental awareness has become an urgent topic for discussion and concern in the global community as has been seen in the recent Paris Treaty. In order for a country to be more attractive to foreign investors, one can consider implementing incentives that simultaneously reduce costs while also enabling environmental initiatives. Incentives are policies or regulatory measures that are applied to serve both as a reason to increase foreign direct investment while also maintaining control over possible investment impacts.
Fiscal incentives alone, such as tax laws that aim to reduce the corporate tax burden, do not contribute much to attracting foreign direct investment in research and development. Financial incentives contribute money directly from the government to the company; this could include direct capital subsidies or subsidized loans. Incentives that combine fiscal and financial aspects, have the capacity to increase interest in investment.
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Foreign Direct Investment and Environment in Different Countries
Canada
Canada is part of the OECD, an amalgamation of countries dedicated to working simultaneously to improve environmental sustainability. Research shows that total CO 2 emissions have increased for Canada. One study shows that Canada is not ready to avoid the effects of environmental problems that come with economic growth because it does not have a high level of GDP per capita to avoid this negative effect at this time. While other studies show that Quebec, which is a major exporter of hydropower, reduced their greenhouse gas emissions by 35%.
Since the 1980s, Canada has developed a more relaxed foreign direct investment policy to attract investment. For example, China's recent investment in Canada's oil and gas industry has raised concerns that such investments could increase global emissions. Furthermore, Canada is involved in water trading agreements with the United States such as NAFTA. The researchers believe the water trade agreement affects the sustainability of water management. It is stated that water governance and management are changing in Canada. There are many commodities produced with water, which can increase competition for water resources and this may have an impact on water security.
Canada has taken the first step towards becoming more environmentally conscious in their trade agreements and environmental regulatory policies. To address air pollution and its impact on the environment such as acid rain, Canada has partnered with the United States through the Canadian-American Air Quality Agreement. Canada and the United States work together to overcome the problem of acid rain. In addition, chemicals and industrial wastes have economic benefits but also pollute the environment. Canada is part of several groups such as the UN Commission on Sustainable Development and the Stockholm Convention on Persistent Organic Pollutants, to ensure effective waste management. In addition, Canada is part of a dual trade agreement to ensure economic growth and environmental protection. Canada has created labor-focused trade agreements with countries such as Chile, which focus on promoting environmental transparency and strengthening the effectiveness of domestic environmental laws and regulations.
China
Over the past 30 years China has experienced rapid economic growth. Much research has been dedicated to documenting the impact of foreign direct investment on the environment in China. However, there are various conclusions as to whether such investments benefit the environment for the country. Jiajia Zheng and Pengfei Sheng found that the eastern provinces had evidence of higher market development and lower CO 2 emissions while provinces in the West had evidence of lower market development and higher CO < sub> 2 emissions. It has been documented by the scientific community that there is a correlation between foreign direct investment and China's CO 2 emissions as energy consumption in the long-term impact of CO 2 emissions. The researchers found that a 1% increase in foreign direct investment shares, raising the industry SO2 level by 0.099%, indicating that an increase in foreign direct investment had an impact on emission levels. As market development increases, so does CO 2 emissions. In addition, sulfur dioxide emissions are said to be one of the main sources of pollution in the air.
Some researchers conclude that foreign direct investment has no negative effects on China's natural environment. Research has shown that the presence of foreign direct investment has the potential to reduce air pollution. Foreign direct investment can benefit the Chinese environment as foreign companies bring more efficient technologies that can improve productivity and energy efficiency. China is thriving in a market-oriented economy because these market-oriented reforms improve the efficiency of power generation. In addition, clean technology helps the Chinese environment. Furthermore, there is trade openness, which can have an impact on the environment and has been studied. The results found that international trade will increase revenues, promote consumer spending on environmentally friendly goods and curb emissions as trade openness brings more technology through from developed countries that help the environment.
China takes several steps toward a cleaner environment through policy-making. Research has shown that environmental regulations have the potential to encourage industrial relocation. China has a policy of energy saving and air emissions reductions that have been declared to help move the air pollutant industry. China has succeeded in reducing carbon emissions through its far-reaching efficiency program as in 2004, the country adopted national fuel efficiency standards for vehicles. Although China is improving its environmental regulations, there is still much work to be done such as increasing the transparency of the national accounts with the insight of the environment, and the need for greater enforcement.
India
Statistics show that while there is a long-term, positive but marginal impact, the impact of foreign direct investment in India, the long-term growth of foreign direct investment has an even greater impact on CO 2 . It has been hypothesized that the impact on the environment may be greater because CO 2 emissions are air pollutants normally generated through economic activity. At the turn of the century, India was named the 4th highest in the global CO 2 emission .
Many developing countries want an increase in foreign direct investment flows as it brings the potential for technological innovation. However, research shows that the host country must reach a certain level of development in the education and infrastructure sectors in order to truly capture the potential benefits that foreign direct investment may generate. If a country already has sufficient funds in terms of per capita income, as well as established financial markets, foreign direct investment has the potential to affect positive economic growth. The predetermined financial efficiency combined with the educated workforce are two key measures whether foreign direct investment will have a positive impact on economic growth within a country.
Since 1991, India has sought to increase the interest of foreign direct investment in their country by instilling liberal trade and investment policies. Since making these policy changes India has seen an increase in GDP growth rate of 7% per year. However, since the surge in foreign direct investment flows, pollution emissions and resource depletion have risen at an alarming rate due to greater economic activity (such as cement, transportation and paper industries). There is hope that as revenue growth increases, there will be a long-term positive effect on the environment as consumer demand shifts toward relatively cleaner goods - this shift will cause pollution-filled goods to fall, potentially reducing pollution emissions. India, as well as many developing countries, has experienced rapid economic development after adopting a more liberal economic policy.
There is potential for increased industrial pollution regulation with further economic development because the creation of public institutions developed is capable of regulating the depletion of the environment. However, to date these sectors and public institutions can be implemented, India will continue to experience increased depletion of resources and pollution emissions with increased foreign direct investment.
Nigeria
Research has shown that there is a causal relationship between Carbon dioxide per capita, and foreign direct investment flows in Nigeria. Foreign direct investment can be important in promoting growth in the application of new technologies, encouraging knowledge transfer, and introducing alternative management practices and better organizational institutional arrangements. In many developing countries, foreign direct investment is expected to increase the balance of payments. Therefore, in many African countries, the impact of foreign direct investment is a major outcome of globalization that can encourage them to support and promote liberalization policies. When a country adopts a policy that focuses on liberalization, it helps increase the capital of free movement. Therefore, long-term capital, such as foreign direct investment, can have the potential to realize adverse environmental consequences.
In many discussions of globalization, it can be said that environmental quality can be viewed as a good thing, therefore increasing free trade and foreign direct investment will lead to a cleaner environment. In 1986, Nigeria saw foreign direct investment as a pathway to promote growth that could reach the entire economy and therefore adopted a structural adjustment program for foreign direct investment inflows. Due to the success of the structural adjustment program, Nigeria has been the second largest recipient of foreign direct investment in the continent, with their oil sector receiving 90% of foreign direct investment flows.
However, Nigeria has shown an inverse relationship between gross domestic product (GDP) and carbon dioxide emissions, as per capita GDP increases, per capita emissions fall. The decline in the share of the manufacturing sector in the country explained the average reduction of carbon dioxide emissions per capita by 0.84 tons from 1980-1989 to 0.41 tons from 2000-2009. It has been documented in various studies that developing countries tend to use loose environmental regulations as a method of instilling unethical industries from developed countries in the hope of increasing economic benefits. Studies have concluded that in Nigeria, although there is a long-term relationship between environmental quality and foreign direct investment while the same can not be said for foreign direct investment and economic growth. However, the argument has been made that although "extractive" direct foreign investment may not have a significant impact on the growth and development of a country, making direct foreign investment may be more profitable. There is growing evidence showing that an increase in foreign direct investment in Nigeria, causing damage to their natural environment.
References
Source of the article : Wikipedia
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