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This paper examines the impact of foreign direct investments on environment degradation in the SIDS group by using a sample of six small island developing states for the time period 2004-2014. It provides a better understanding on the relationship between FDI inflows with its control variables and environment pollution. The results show that there is no positive and significant relationship between FDI and CO2 emissions, that is, FDI has no negative impact on the environment. This outcome was contrary to our expectations but can be attributed and explained by the fact that FDI are perceived as the main sources of cleaner advanced technology and sustainable modes of production to the SIDS. The results indicate that a rise in FDI does not lead to a significant increase in the levels of CO2 emissions in SIDS countries. In other words, foreign investments do not appear to facilitate the growth of pollution havens in amongst the SIDS. Furthermore, the combined effects of the fixed effect model and SUR suggests that FDI and its control variables do not contribute to the higher level of CO2 emissions in SIDS economies. A possible explanation for this optimistic finding is that FDI may help emerging economies like the small islands developing states to modernize and upgrade the quality of their capital stock and such technology effects may translate into lower air pollution. The results are consistent with Liang (2006), Pao and Tsai (2011), Fereidouni (2013) and Hassaballa (2013) who argued that FDI does not increase pollution levels the results provide useful information to policymakers of these small island developing states, as it suggests that these countries can concentrate their efforts in attracting higher levels of FDI inflows into their economies. Though there have been several papers which analyzed the FDI-Environment relationship, this is the first one which studied the impact of FDI inflows on environment degradation in the SIDS.

The purpose of this paper is to investigate the relationship between FDI and environmental regulation. A panel data set of 18 European countries has been used for a time period of 1995 to 2013. The dependent variable is FDI and the independent variables are total environmental tax revenue, gross domestic product, gross capital formation, gross national income, trade openness and carbon dioxide emissions.Used time series data (1995-2013) for empirical analysis. The empirical result is that total environmental tax revenue are positively related with FDI. Trade openness is coherent with FDI which is in line with Demirhan et al. (2008) and Edwards (1990). Gross domestic product and FDI are positively significant and the findings are reliable to the study of Mottaleb et al. (2008) and Hakizimana (2015). Gross capital formation and FDI has a positive relationship which is line with Krkoska (2001) and Awan et al. (2014). Gross national income and FDI has a negative relationship which is reliable to the study of Antwi et al. (2013) but unreliable to Awan et al. (2014). Nevertheless only carbon dioxide emissions has failed to be in line with the expected outcome. This empirical study implies increase in FDI will lead to an increase of total environmental tax revenue that may help the government to control the environment quality of their country by monitoring FDI inflows and a decrease in FDI inflow results in a less polluting environment. Further FDI revenue can boost up economic growth but that will be at the expense of the environment where government should come up with proper contract with the foreign investors in which it must be stated that use of green technology to decrease carbon dioxide emission and use of more environmentally friendly means of transport so that pollution in these countries could be alleviated. Governments should also motivate FDI to adopt lower levels of pollution by providing of subsidies, grants for the acquisition of environmentally friendly products and adopting production schemas which have a low impact on the environment.

At the same time as the General Agreement on Tariffs and Trade (GATT) and the World Trade Organization (WTO) have been encouraging trade liberalized, there has been a proliferation of Regional Trade Agreements (RTAs). These RTAs also aim to reduce trade barriers, but they do so it in a preferential way. There is continued debate as to whether such RTAs are an effective way of achieving free trade, or if increased trade among members causes less trade with non-member countries? If RTAs increase total trade, this is known as ‘trade creation’, whereas if the extra trade occurs at the expense of non-members, this is called ‘trade diversion’. Trade creation implies improved welfare, whereas ‘trade diversion’ may adversely affect welfare. This paper examines five different RTAs using a gravity model to see if they have been trade creating or trade diverting. Annual data from 26 countries covering five RTAs in the Asia and Pacific region for the years 1980–2000 was used. The results show that the effects of the different RTAs varied remarkably. The Association of South East Asian Nations (ASEAN) and the Australian and New Zealand Closer Economic Relations (CER) fostered greater trade with trading partners and with the rest of the world. While the Asian Pacific Economic Cooperation (APEC), the Southern Cone Common Market (MERCOSUR) and the North American Free Trade Association (NAFTA) tended to be trade diverting, that is, they expanded intra-bloc trade at the expense of trade with others.