Politická ekonomie X:X | DOI: 10.18267/j.polek.1522

Foreign Direct Investment, Fiscal Decentralization, and ICT: Pathways to Environmental Sustainability in Canada Under Geopolitical Uncertainty

Babatunde Sunday Eweade ORCID...
Babatunde Sunday Eweade, Department of Economics, Faculty of Business and Economics, Eastern Mediterranean University North Cyprus, Gazimağusa, Turkey

Balancing economic growth with environmental sustainability remains a pressing challenge for Canada, particularly in the face of rapid technological advancement, global integration, and increasing geopolitical uncertainty. This study analyzes the effects of economic growth, foreign direct investment, ICT development, trade openness, fiscal decentralization, and geopolitical risk on Canada\'s CO2 emissions from 1980 to 2022. Using the ARDL bounds test and Toda-Yamamoto causality method, the results confirm that economic growth and other macroeconomic and institutional factors significantly shape emission trends. FDI, trade openness, ICT development, fiscal decentralization, and geopolitical risk all raise carbon emissions in the short and long run. Causality tests show a two-way link between economic growth and CO2 emissions, while the other factors act as external drivers without feedback. These findings underscore the importance of strengthening environmental standards for FDI and trade, expanding clean energy to support digital infrastructure, enhancing intergovernmental coordination on fiscal matters, and improving Canada\'s resilience to geopolitical disruptions. Overall, the study provides new empirical insights and actionable guidance for policymakers aiming to align Canada\'s economic aspirations with its carbon reduction commitments in an increasingly uncertain global environment.

Keywords: Fiscal decentralization, geopolitical uncertainty, economic growth, carbon emissions, ARDL, Toda-Yamamoto causality test

Received: January 3, 2025; Revised: June 16, 2025; Accepted: July 23, 2025; Prepublished online: January 21, 2026 

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