Foreign Direct Investment, Economic Growth, Institutional Quality, and Fossil Energy Consumption on Ecological Footprint: Evidence from the Emerging Seven (E7) Countries

Zakaria Zebua; Miguel Angel Esquivias

doi:10.59261/inkubis.v8i3.305

Authors

Zakaria Zebua Universitas Airlangga
Miguel Angel Esquivias Universitas Airlangga

DOI:

https://doi.org/10.59261/inkubis.v8i3.305

Keywords:

ecological footprint, foreign direct investment, environmental kuznets curve, institutional quality, Fossil Energy Consumption

Abstract

Background: The Emerging Seven (E7) China, India, Indonesia, Brazil, Russia, Mexico, and Turkey account for approximately 50% of global carbon emissions while experiencing rapid economic growth, industrialization, and fossil energy dependence. These conditions generate multidimensional ecological pressures, requiring assessment through the Ecological Footprint (EFP).

Objective: This study examines the effects of Foreign Direct Investment (FDI), economic growth, institutional quality, and fossil energy consumption on EFP in E7 countries during 2002–2022.

Methods: Panel data from the seven E7 countries were analyzed using the Fixed Effects (FE) model and Driscoll–Kraay robust standard errors (FE-DK).

Results: Economic growth exhibits an N-shaped Environmental Kuznets Curve (EKC). FDI and fossil energy consumption have significant positive effects on EFP, supporting the Pollution Haven Hypothesis and confirming the ecological pressure associated with fossil-fuel dependence. Conversely, institutional quality has a significant negative effect on EFP, indicating that stronger governance and environmental regulatory effectiveness can reduce ecological pressure. Based on the cubic specification (β₁ = 17.8076, β₂ = −2.1471, β₃ = 0.0853), the first turning point occurs at approximately lnGDP = 7.91 (GDP per capita ≈ USD 2,722), while the second occurs at lnGDP = 9.36 (≈ USD 11,599), highlighting heterogeneous development stages across E7 economies.

Conclusion: The FE-DK results remain consistent with the baseline estimates, strengthening the robustness and empirical validity of the findings. The results underscore the importance of institutional strengthening, cleaner energy transition, and environmentally oriented FDI policies in reducing ecological pressure across E7 countries.

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