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Energy savings via FDI? Empirical evidence from developing countries

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M. Hübler
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This paper analyses macro level data on 60 developing countries for the period 1975-2005 to examine the influence of foreign direct investment (FDI) inflows on energy intensities. Contrary to Mielnik and Goldemberg (2002), it finds no evidence that FDI inflows generally reduce developing countries' energy intensities. Interactions of FDI with country-specific characteristics do not show significant effects either.In fact, energy saving technology transfer from FDI inflows might be too small to yield significant effects. Also, energy savings might be offset by a change in the economy's output composition towards a more energy intensive production.It is therefore necessary to explicitly encourage energy reducing technology transfers. Issue-linkage such as in the clean development mechanism of the Kyoto protocol might be useful. Future research should identify country-specific characteristics that enhance technology transfer via FDI.