Does foreign direct investment impede forest area in Sub‐Saharan Africa?

Foreign direct investment is an engine of economic growth. However, it may affect environmental quality (improve or deteriorate it), depending on the context. Under a multivariate framework, this paper aims to investigate the relationship between foreign direct investment and deforestation for Sub‐Sahara African countries with economic growth, trade openness and urbanization as additional determinants of deforestation. The analyses reveal that all variables are non‐stationary and cointegrated based on recent panel data techniques. On applying dynamic ordinary least squares, the long‐run results suggest the validity of the pollution haven hypothesis for some countries, and that of the pollution halo hypothesis for other countries. The findings are also mixed across Sub‐Sahara African countries for trade openness and urbanization. The results from this study suggest that Sub‐Sahara African countries should continue attracting foreign direct investment, while a certain number of them should put more emphasis on controlling deforestation associated with foreign direct investment inflows to limit greenhouse gas concentrations in the atmosphere.