Sub-Saharan Africa (SSA) confronts a pressing trade-off between attracting foreign direct investment (FDI) to stimulate economic development and curbing the associated rise in greenhouse gas (GHG) emissions. However, empirical evidence on whether environmental regulation can effectively mitigate the environmental footprint of FDI remains limited and inconclusive, particularly across SSA’s diverse institutional and income settings. This study examines whether environmental regulation moderates the FDI-emissions nexus and how this relationship varies across subregions, income levels, and time horizons. We analyse a balanced panel of 42 SSA countries from 2005 to 2023, employing Panel-Corrected Standard Errors (PCSE) as the primary estimator, with Driscoll–Kraay, instrumental variables, and Common Correlated Effects Mean Group (CCEMG) methods for robustness. FDI exerts a positive and significant effect on GHG emissions ( β = 0.411, p < 0.001), confirming the pollution haven hypothesis (H1). Stronger environmental regulation directly reduces emissions ( β = −0.522, p < 0.001) (H2) and, crucially, negatively moderates the FDI-emissions relationship ( β = −3.920, p < 0.001) (H3). The Environmental Kuznets Curve is validated, with a turning point of USD 3545 PPP (H4). Subregionally, the moderating effect is strongest in West and East Africa; by income group, it is most effective in low- and upper-middle-income countries. Theoretically, the study integrates pollution haven and ecological modernisation frameworks by demonstrating that environmental regulatory stringency (ERS) conditions the environmental outcomes of FDI. Policy implications underscore the need for strengthened regulatory enforcement, income-differentiated interventions, and enhanced regional cooperation to decouple FDI-driven growth from environmental degradation.
Tang et al. (2026) studied this question.