Carbon Emissions and Its Relationship with Foreign Trade Openness and Foreign Direct Investment

Asma Salman, Muthanna G. Abdul Razzaq (), Bisharat Hussain Chang (), Wing-Keung Wong and Mohammed Ahmar Uddin ()
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Muthanna G. Abdul Razzaq: College of Business Administration, American University in the Emirates, Dubai, United Arab Emirates
Bisharat Hussain Chang: Department of Business Administration Sukkur IBA University, Sukkur, Sindh, Pakistan
Wing-Keung Wong: Department of Finance, Fintech & Blockchain Research Center, and Big Data Research Center, Asia University, Taiwan4Department of Medical Research, China Medical University Hospital, Taiwan5Department of Economics and Finance, The Hang Seng University of Hong Kong, Hang Shin Link, Siu Lek Yuen, Hong Kong
Mohammed Ahmar Uddin: Department of Finance and Economics, College of Commerce and Business Administration, Dhofar University, Salalah, Dhofar, Oman

Journal of International Commerce, Economics and Policy (JICEP), 2023, vol. 14, issue 03, 1-22

Abstract: Previous research has investigated the connections between foreign direct investment (FDI), carbon emissions (CO2), and foreign trade openness. However, these past studies did not specifically focus on industrial sectors in China and their carbon emissions, thus leaving a gap in understanding this relationship. In our study, we aim to contribute to the existing body of knowledge by employing a threshold regression model with a threshold variable. This model calculates how strongly carbon emissions are produced to assess the impact of the industrial sector on carbon emissions. Our findings reveal that foreign trade openness and FDI have a threefold threshold impact on industrial carbon emissions. The effect of FDI on carbon emissions in the industrial sector shows a pattern of initially lowering and then increasing the emissions, indicating potential harm. Conversely, the impact of foreign trade openness on carbon emissions exhibits both positive and negative effects. While foreign trade openness exacerbates carbon emissions in economic sectors with lower carbon intensity, it helps mitigate emissions in sectors with high- carbon emission levels. Furthermore, our study identifies that the intensity of economic activity, per capita GDP, and the number of employees all significantly influence the industrial sector’s carbon emissions. By employing the latest cutting-edge methodology, our research opens the door for extrapolating these findings to other nations for a comprehensive analysis.

Keywords: Foreign direct investment; threshold regression; carbon emissions; foreign trade openness (search for similar items in EconPapers)
JEL-codes: F18 O13 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (2)

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DOI: 10.1142/S1793993323500230

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