Regional Patterns of the Effect from Environmental Regulation: CO2 Emissions across Developed and Developing Countries

Against climate change, global cooperation has been actively pursued to decrease air pollution emissions. However, pollution haven may be formulated due to differences in environmental regulation among countries. By comparing developed countries with developing ones, the current paper tries to validate the pollution haven hypothesis and analyzes industrial structure changes and pollution outcomes. It is revealed that foreign direct investment (FDI) into developing countries tends to increase the quantity of pollution material. Value-added energy-intensive manufacturing in developed countries is negatively related to pollution quantity, while non-energy-intensive manufacturing contributes to a decrease in pollution quantity in developing countries. This result implies that innovative activity in developed countries is apparent in developed countries to reduce pollution, while the developing countries shift from energy-intensive toward non-energy-intensive manufacturing. According to the results obtained, international effort on environmental policies is required for non-energy-intensive manufacturing, developing countries to achieve pollution reduction by technological development.