How Foreign Direct Investment Influences Carbon Emissions, Based on the Empirical Analysis of Chinese Urban Data

Abstract

The overabundance of carbon emissions is widely considered as a serious world problem. This paper focuses on analyzing the influence of economic factors on carbon emissions. Based on the traditional STIRPAT model, in terms of the "pollution haven hypothesis" and "pollution halo hypothesis", this paper employs the dynamic panel data model to explore the impact of economic elements such as economic growth, population, foreign direct investment and others on carbon emissions. Based on our research, China's urban carbon emissions do not follow the inverted U-shaped hypothesis of the traditional EKC curve theory and presents an inverted N-type. Moreover, current foreign direct investment increases the carbon emissions of Chinese cities due to the "implicit trade carbon". However, during the lagging period of one phase, it significantly reduced urban carbon emissions. In addition, the lag of one period of carbon emissions statistically led to carbon emissions at the current stage. According to the empirical analysis results, this paper proposes some reasonable improvements for carbon dioxide emission reduction, which have certain reference values for other developing countries facing similar carbon emission reduction challenges.

Carbon Emission Effects of the Coordinated Development of Two-Way Foreign Direct Investment in China

“…The effect of the capital-labor ratio on carbon emissions is significantly negative, which is consistent with the conclusion of Zhou et al [33]. The capital-labor ratio reflects the basic resource allocation in the production, and the composition of its change mainly depends on the technical conditions of production.…”

“…The two-way FDI coordinated development has a significant effect on emission reduction. Previous studies only focused on the effects of IFDI or OFDI on the environment [21,33]; however, this study is the first to conclude that the findings agree with China's strategy of IFDI and OFDI coordinated development and guidance for China's emission reduction, and thus the sustainable development goal of opening up and environmental protection can be integrated effectively.…”

“…Some of them support the 'pollution-haven' hypothesis [30][31][32][33], whilst others focus on the 'pollution-halo' hypothesis [34][35][36]. In particular, these studies have only focused on the total effects of IFDI on the host country's environment, and do not discuss the mechanism of IFDI on the environment [33]. Another stream of research has been undertaken on the mechanism investigation [13,15], but such literature has also ignored the possibilities of pollution diffusions across regions because of interregional economic activities.…”

“…In a nutshell, most of the previous studies have investigated the positive and negative impacts of IFDI on the host country's environment. Some of them support the 'pollution-haven' hypothesis [30][31][32][33], whilst others focus on the 'pollution-halo' hypothesis [34][35][36]. In particular, these studies have only focused on the total effects of IFDI on the host country's environment, and do not discuss the mechanism of IFDI on the environment [33].…”

“…The higher ratio of capital to labor in the production means higher technical efficiency, and thus the ratio of capital to labor can also reflect the level of the technical level to a certain extent. In general, capital-intensive production has a higher technology level, and the labor-intensive production technology level is lower [33]. It is worth noting that capital-intensive industries may have cleaner production technology [37] and also carry higher energy consumption and emission demand [18] at the same time.…”