Environmental impacts of trade and FDI: a scoping review

Abstract

Global economic integration has heightened concerns about environmental degradation, with trade and foreign direct investment (FDI) widely seen as major drivers. This study applies the Preferred Reporting Systematic Reviews and Meta-Analyses extension for Scoping Reviews (PRISMA-ScR) approach to examine the effects of trade and FDI on environmental quality and efficiency between 2018 and early 2024. The findings are consistent with both the Pollution Haven and Pollution Halo hypotheses. Specifically, in economies with weak environmental regulations, trade and FDI tend to exacerbate pollution, whereas in advanced economies, they promote cleaner production techniques and technological progress, thereby reducing carbon emissions. Since the literature predominantly addresses global issues, research focusing on Africa remains limited, especially with respect to the role of indigenous knowledge in shaping environmental outcomes. Geographically, Asia dominates the discourse, contributing 34% of studies on trade, FDI, and environmental degradation, and 69% of studies on environmental efficiency, while Africa and Europe are markedly underrepresented. This review highlights the need for Africa-focused research to inform evidence-based policies that balance economic growth with environmental sustainability.