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Balancing Investment and Climate: The Impact of International Investment Agreements on Environmental Ambition

Dahlbeck, Henrik LU and Jartsell, Nora (2025) NEKH01 20242
Department of Economics
Abstract
This study aims to investigate if inflexible investment agreements limit countries’ environmental
ambition, mainly focusing on the potential existence of regulatory chill. A panel dataset of 54
countries covering the years from 2008 to 2023 is used to examine the relationship. The analysis
employs a fixed effects regression model, initially applying the Environmental Kuznets Curve
theoretical framework to establish a baseline relationship between environmental ambition,
measured by the Climate Change Performance Index, and GDP per capita. Building on the
baseline model we at a later stage include inflexible investment agreements and foreign direct
investment inflows as variables to examine the existence of regulatory chill. We use... (More)
This study aims to investigate if inflexible investment agreements limit countries’ environmental
ambition, mainly focusing on the potential existence of regulatory chill. A panel dataset of 54
countries covering the years from 2008 to 2023 is used to examine the relationship. The analysis
employs a fixed effects regression model, initially applying the Environmental Kuznets Curve
theoretical framework to establish a baseline relationship between environmental ambition,
measured by the Climate Change Performance Index, and GDP per capita. Building on the
baseline model we at a later stage include inflexible investment agreements and foreign direct
investment inflows as variables to examine the existence of regulatory chill. We use the baseline
model to predict the expected Climate Change Performance Index for each country in our sample
to see the effect of the predicted scores when adding inflexible investment agreements. While the
finding of our study indicates no causal evidence of regulatory chill, it shows that certain
countries transition from overperforming to underperforming relative to their predicted Climate
Change Performance Index, suggesting a potential influence in specific contexts. Limitations,
including potential endogeneity, underscore the need for more advanced models in future studies.
The research contributes to a relatively unexplored field, highlighting the importance of refining
methodologies to better understand the relationship between environmental ambition and
international investment agreements. (Less)
Please use this url to cite or link to this publication:
author
Dahlbeck, Henrik LU and Jartsell, Nora
supervisor
organization
course
NEKH01 20242
year
type
M2 - Bachelor Degree
subject
keywords
Inflexible investment agreements, Environmental ambition, Regulatory chill, Environmental Kuznets Curve, Climate Change Performance Index, GDP per capita, Foreign direct investment
language
English
id
9185223
date added to LUP
2025-05-08 09:15:40
date last changed
2025-05-08 09:15:40
@misc{9185223,
  abstract     = {{This study aims to investigate if inflexible investment agreements limit countries’ environmental
ambition, mainly focusing on the potential existence of regulatory chill. A panel dataset of 54
countries covering the years from 2008 to 2023 is used to examine the relationship. The analysis
employs a fixed effects regression model, initially applying the Environmental Kuznets Curve
theoretical framework to establish a baseline relationship between environmental ambition,
measured by the Climate Change Performance Index, and GDP per capita. Building on the
baseline model we at a later stage include inflexible investment agreements and foreign direct
investment inflows as variables to examine the existence of regulatory chill. We use the baseline
model to predict the expected Climate Change Performance Index for each country in our sample
to see the effect of the predicted scores when adding inflexible investment agreements. While the
finding of our study indicates no causal evidence of regulatory chill, it shows that certain
countries transition from overperforming to underperforming relative to their predicted Climate
Change Performance Index, suggesting a potential influence in specific contexts. Limitations,
including potential endogeneity, underscore the need for more advanced models in future studies.
The research contributes to a relatively unexplored field, highlighting the importance of refining
methodologies to better understand the relationship between environmental ambition and
international investment agreements.}},
  author       = {{Dahlbeck, Henrik and Jartsell, Nora}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{Balancing Investment and Climate: The Impact of International Investment Agreements on Environmental Ambition}},
  year         = {{2025}},
}