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When green is not attractive: energy transition, capital inflows, and environmental outcomes in BRICS economies
Green transitions are widely expected to attract cleaner capital and accelerate decarbonization; however, emerging-economy evidence increasingly challenges this assumption. This study examines the dynamic relationship between energy transition indicators and capital inflows in BRICS+ economies over the period 1996–2022, explicitly testing the “Green Haven” hypothesis under conditions of global uncertainty. Unlike much of the existing BRICS+ literature, which examines the energy–growth, foreign direct investment (FDI)–emissions, or innovation–environment nexus separately, this study jointly analyzes the Green Haven hypothesis, Pollution Haven hypothesis, Hicksian induced innovation mechanism, and uncertainty-driven carbon fallback effect within a unified dynamic framework. Using the Pooled Mean Group–Autoregressive Distributed Lag (PMG-ARDL) framework, the analysis is justified by the mixed integration order of the variables and the need to allow heterogeneous short-run dynamics while estimating common long-run relationships across countries. The results reject the Green Haven hypothesis, showing that renewable energy (RE) expansion does not significantly attract FDI (β = 0.036, p = 0.320). Instead, FDI Granger-causes carbon dioxide (CO₂) emissions, lending support to the Pollution Haven hypothesis. Conversely, the findings provide evidence for Hicksian induced innovation, as environmental degradation stimulates research and development (R&D) investment (β = 2.075, p < 0.01). Paradoxically, large-scale RE deployment appears to crowd out domestic innovation efforts (β = −0.019, p < 0.01). Moreover, global uncertainty shocks are found to reinforce carbon-intensive development trajectories. These results suggest that passive RE expansion is insufficient to enhance financial attractiveness or ensure environmental gains. Effective energy transition strategies require conditional green FDI frameworks, innovation-aligned investment policies, and resilience mechanisms to safeguard decarbonization objectives in emerging economies.