Has the development of FDI and foreign trade contributed to China's CO2 emissions? An empirical study with provincial panel data

Yu Hao and Yi-Ming Liu

No 72, CEEP-BIT Working Papers from Center for Energy and Environmental Policy Research (CEEP), Beijing Institute of Technology

Abstract: Since the reform and opening up in 1978, China's Foreign Direct Investment (FDI) and foreign trade have grown rapidly. At the same time, China's Carbon Dioxide (CO2) emissions surged and China has become the world's biggest CO2 emitter. The purpose of this paper is to investigate the relationship between FDI, foreign trade and Carbon Dioxide emissions in China. Using a two-equation model adapted from Halkos and Paizanos (2013), the total impact of FDI on emission is divided into the direct and indirect impacts and estimated accordingly. The results suggest that the increase in per capita FDI helps to inhibit the growth of China's per capita CO2 emissions. Concretely, the dominating direct effect of FDI on carbon emissions is negative and the indirect effect is positive. However, for foreign trade, both direct and indirect effects on CO2 emissions are insignificant after taking consideration of potential endogeneity and introducing dynamics.

Keywords: Foreign Direct Investment; Panel Data; CO2 Emissions; Direct and indirect impacts (search for similar items in EconPapers)
JEL-codes: Q47 Q54 (search for similar items in EconPapers)
Pages: 17 pages
Date: 2014-09-02
New Economics Papers: this item is included in nep-cna, nep-ene, nep-env, nep-int and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Published in Natural Hazards.

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Related works:
Journal Article: Has the development of FDI and foreign trade contributed to China’s CO 2 emissions? An empirical study with provincial panel data (2015)
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