Foreign Direct Investment, Technology Innovation and Carbon Emissions: Evidence from China

Jinliang Wang, Yaolin Ruan () and Chenggang Wang
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Jinliang Wang: School of Economics and Business Administration, Heilongjiang University, Harbin 150080, China
Yaolin Ruan: School of Economics and Business Administration, Heilongjiang University, Harbin 150080, China
Chenggang Wang: School of Economics and Business Administration, Heilongjiang University, Harbin 150080, China

Sustainability, 2024, vol. 16, issue 22, 1-31

Abstract: FDI is a critical factor influencing carbon emissions and a significant driver of China’s economic development. However, achieving sustainable economic development remains a major challenge for China. Hence, this paper aims to explore how to foster positive interactions between FDI and carbon emissions. Specifically, we first analyze the mechanism of FDI on carbon emissions from a theoretical perspective. Then, using panel data from 27 provinces in China, an empirical analysis is conducted. In the empirical analysis, we use the panel regression models to analyze the impact of FDI on carbon emissions. Additionally, a configuration analysis method is employed to examine the interactive relationship between FDI quality and carbon emissions. The conclusions of this paper are as follows. Overall, FDI significantly inhibits carbon emissions across provinces, with this effect strengthening as the scale and quality of FDI increase. Heterogeneity analysis shows that the inhibitory effect of FDI on carbon emissions is more pronounced in provinces with high technological financial support and stringent environmental regulations. Mediation analysis indicates that technological innovation serves as a mediator between FDI and carbon emissions, which means that FDI could promote “the quality improvement and the quantity increase” of green technological innovation to reduce carbon emissions. Furthermore, the configuration analysis shows that the carbon reduction effect of FDI results from the combined influence of various factors. Among those, FDI’s export capacity is a key factor. The findings above enhance our knowledge of the environmental effects of FDI from the perspective of FDI quality. Moreover, these explorations also offer new insights and strategies for China’s pursuit of sustainable economic development.

Keywords: carbon emissions; green technology innovation; FDI; environmental regulation; economic sustainable development (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2024
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