Impact of FDI and foreign trade openness on carbon emissions in China: evidence from threshold regression model

Meilian Liu, Mei Zhan, Yiping Liu and Ming Zhao

Applied Economics, 2024, vol. 56, issue 58, 8332-8345

Abstract: Using panel data of 20 industries in China from 2006 to 2019, this paper constructs a fixed effect model to study the impact of FDI (foreign direct investment) and foreign trade on China’s industrial carbon emissions. We combine the panel threshold model to explore the impact mechanism of FDI and foreign trade on industrial carbon emissions under the difference of independent technological innovation. Research efforts has shown that FDI and foreign trade have a long-term promoting effect on industrial carbon emissions, indicating that the ‘pollution shelter’ hypothesis is valid in the context of China’s industrial industry. The threshold regression indicates that with the increase of independent technological innovation, the increase in carbon emissions promoted by FDI while foreign trade decreases. When considering heterogeneity issues, FDI and foreign trade in moderately and heavily polluting industries significantly increase carbon emissions compared with lightly polluting industries; Compared with heavily polluting industries, moderately polluting industries have a more significant positive impact on carbon emissions from foreign trade. The research conclusion provides reference for reducing carbon emissions and improving environmental quality by emphasizing the industry structure of FDI and foreign trade, fully stimulating independent technological innovation, and creating an innovation atmosphere.

Date: 2024
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DOI: 10.1080/00036846.2023.2290589

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