Green shifts in foreign capital: asymmetric effects of FDI and income on CO2 emissions in Bulgaria

This study examines the asymmetric environmental effects of foreign direct investment (FDI) and income growth in Bulgaria, linking the analysis to broader globalization debates on the ecological consequences of cross-border capital flows. Using quarterly data from 2014Q1 to 2024Q2 and a nonlinear autoregressive distributed lag (NARDL) model, we assess how sector-specific FDI in manufacturing and construction affects per capita CO 2 emissions. By decomposing FDI and GDP per capita into positive and negative shocks, we test whether globalization-driven inflows and income expansions support low-carbon development. The results indicate a long-run “pollution halo” effect, with rising FDI and income reducing emissions, while contractions in income elevate them. In contrast, short-run dynamics point to temporary “pollution haven” patterns. These findings underscore the dual role of globalization: cross-border investment can initially intensify environmental pressures but, under robust regulatory frameworks, fosters technological upgrading and green transitions. The study contributes to globalization research by offering asymmetric, sector-specific evidence from an emerging industrial EU economy with a peripheral role in global value chains.