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Outward foreign direct investment and carbon emissions in the home country: evidence from China

Author

Listed:
  • Zehao Li
  • Wenhui Liu
  • Minji Hu
  • Zongwen Zuo

Abstract

The objective of this study is to investigate the impact and operational mechanism of Outward Foreign Direct Investment (OFDI) on domestic carbon emissions. We utilise panel data collected from 30 provinces spanning the period between 2004 and 2017 for our analysis. The results show that OFDI has a significant inverse U-curve relationship to carbon emissions. After the robustness test, the results still hold. Heterogeneity analysis shows that in eastern China and economically developed regions, OFDI and carbon emissions show a significant U-shaped reversal. The analysis of mechanisms reveals that there exists a threshold effect in the impact process of OFDI on regional carbon emissions, particularly influenced by the share of the tertiary sector. When the tertiary sector share is higher than 73.2%, that is, when the industrial structure tends to be highly developed, the improvement of OFDI will reach the goal of carbon emission reduction. This paper offers policy recommendations for China, aiming to facilitate the expansion of OFDI, drive the enhancement of regional industrial structure and ultimately work towards achieving the objective of 'attaining carbon peak and carbon neutrality'.

Suggested Citation

  • Zehao Li & Wenhui Liu & Minji Hu & Zongwen Zuo, 2024. "Outward foreign direct investment and carbon emissions in the home country: evidence from China," International Journal of Global Energy Issues, Inderscience Enterprises Ltd, vol. 46(5), pages 500-521.
    • Handle: RePEc:ids:ijgeni:v:46:y:2024:i:5:p:500-521
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