A systematic literature review for the nexus between CO2 emissions, energy use and foreign direct investment
Foreign direct investment (FDI) plays an important role in economic development, energy demand, renewable-energy transition, and environmental quality. However, existing evidence remains fragmented and contradictory, particularly regarding whether FDI supports cleaner production through the Pollution Halo effect or increases environmental pressure through the Pollution Haven effect. This systematic literature review synthesizes 86 peer-reviewed studies on the nexus between FDI, CO2 emissions, energy use, renewable energy, and macroeconomic indicators. Following a PRISMA-based procedure, the review organizes the literature into three themes: FDI-Energy and Renewable Transition, FDI-Environment, and FDI-Macroeconomic and Institutional Determinants. The findings show that FDI is more consistently associated with higher energy consumption and energy intensity than with renewable-energy transition. In the environmental literature, both Pollution Haven and Pollution Halo evidence are found, but the direction of effect depends on income level, institutional quality, energy structure, renewable-energy policy, and technological capability. The review further shows that ARDL-type models, panel cointegration, and GMM approaches dominate the literature, while nonlinear, threshold, quantile, and moderator-based approaches remain underused. The study contributes by developing a conditional framework explaining when FDI is likely to worsen environmental degradation or support low-carbon development. Policy implications highlight the need to align FDI with renewable energy, green technology, financial development, and regulatory quality.