The Environmental Impact of the FDI Inflow in the Transport Sector of OECD Countries and Policy Implications

This work investigates the relationship between foreign direct investment (FDI) inflowing in the transport sector and its connected activities of storage and communication of 30 Organisation for Economic Co-operation and Development (OECD) countries and the carbon dioxide (CO2) emission from sectoral fuel combustion. To this purpose, an unbalanced dataset containing statistical information, all derived from different databases of various international organizations, for the 25 years between 1981 and 2005 is analysed through the use of the econometric technique of panel data. Apart from other evidence, the empirical result shows the existence of a negative relationship, although quantitatively very low, characterizing the cumulative effect of the considered type of FDI on CO2. This helps us to understand that the foreign investment flow arriving in the transport sector of the considered OECD receiving countries does not generate a dangerous detriment to the environment as can generally be expected. As a result, we argue in favour of those policy prescriptions suggesting its enforcement.