Assessing the foreign direct investment-load capacity factor relationship in Spain: can FDI contribute to environmental quality?

This study examines the relationship between foreign direct investment (FDI) and pollution in Spain from 1961 to 2018 using an autoregressive distributed lag regression model (ARDL). Our analysis shows that FDI has a significant negative effect on the load capacity factor (LCF) in both the short and long term, with an average of -0.05% on the latter variable. The study frames our estimates among the pollution haven hypothesis and concludes that FDI in Spain does not contribute to the transfer of green technologies for cleaner production. We also verify the environmental Kuznets curve (EKC) and the load capacity curve hypothesis (LCC) in the Spanish context and find that income per capita has a positive impact on environmental sustainability and quality. Our results suggest that economic development and an efficient renewable energy infrastructure could effectively improve pollution indexes in Spain in terms of sustainability.