The Effect Of Foreign Direct Investment On China’s Carbon Dioxide Emission:Mechanism And Empirical Research

The impact of carbon dioxide (CO2) on climate change has become one of the major issues all over the world. In2009, the "Copenhagen Accord" has put "to control global warming within2degrees Celsius range"in the states’consensus. Currently, the research on response to climate change, reducing energy consumption, carbon emission abatement has reached an unprecedented height. Since the reform and opening up, China’s absorption of FDI has increased continuously, and China has been the top developing country in absorption of FDI during20consecutive years. Meanwhile, China’s total CO2emissions has increased from1.483billion tons in1978to8billion tons in2011, and has been the world’s largest emitter of greenhouse gases, and then carbon emission per unit output has been three times more than the world average."" Twelfth Five-Year "Plan" pointed out that China should "thoroughly implement the basic national policy of the conservation of resources and environmental protection, save energy and reduce greenhouse gas emissions intensity, actively respond to climate change, promote the harmony development in economy, population, resources and environment". This means that, under the situation that China’rapid growth in absorption of FDI, taking into account the carbon emissions pressures facing China, and the great importance of "energy saving", studying the impacts of FDI on China’s carbon dioxide emissions has an important practical significance.The research of this paper is conducted in two levels:On the one hand, through the relevant literature review, based on the economics theory in international investment, economic growth and environment, by constructing threshold effects mechanisms of FDI on carbon emissions, deriving a multi-channel theoretical model on the impacts of FDI on carbon emissions, sorting the impacts mechanisms of FDI technology spillover on carbon emissions through different channels, this paper qualitatively analyzed the influence pathways and mechanisms of FDI on China’s carbon emissions; on the other hand, on the basis of relevant theories and mechanism, referring to the status and trend of FDI, carbon emission in China, using30provincial-level regions,35industries as research objects, through panel threshold estimation, panel simultaneous equations estimation, and DEA-Malmqusit index calculation, this paper quantitatively measured the effects of FDI on China’s carbon emission. The research work is concentrated in the following areas:Firstly, in order to investigate the influence of heterogeneity factors investment area or industry on carbon emissions effect of FDI, we analyzed the mechanism of FDI threshold effects from per capita income, human capital, research and development, environmental regulation and regional corruption channels, break through the limitations of existing research. Based on the related theoretical analysis, through threshold panel estimation methods, using China’s29provinces in1995-2011and35industrial sectors in1999-2010as study objects, this paper empirically studied the threshold effects of FDI on Chinese carbon emissions. Research in region level shows:when per capita income is at higher or lower level, FDI has a more significant positive impact on China’s carbon emissions; and when per capita incomes in the middle stage, FDI will significantly increase local carbon emissions. When regional R&D investment is at a low level, the positive impact of FDI on local carbon emissions is not significant; and when local R&D investment reaches a high level, the positive impact of FDI is very significant; while the local R&D investment reaches a higher level, the positive impact will be weakened.When human capital, environmental regulation is at a high level, or corruption is low, FDI will be beneficial to regional carbon emissions abatement; and vice versa. Analysis in industry level shows that:When the industry R&D investment, environmental regulation is in high stage, FDI will reduce carbon emissions in industry sectors; and vice versa. Meanwhile, according to the trends of threshold variables in the region and industry during the study period, we find that the positive impact of FDI on China’s carbon emissions is gradually increased.Secondly, to fully investigate the influence of FDI on the carbon emissions through different channels, based on the theoretical model derived from Copeland and Taylor (1994), by abandoning the assumption of exogenous environmental taxes, introducing the impact of FDI on environmental regulation (environmental tax), this paper briefly analyzes the impact of FDI on carbon emissions through size, structure, technology, and environmental regulation channels, on the condition that there is one country, two elements, and two products, this paper has improved the existing theoretical research framework. Similarly, based on the analysis of related models, putting China’s30provinces in2000-2008and35industrial sectors in1999-2008as study objects, using system GMM (SYS-GMM) estimation method, by building the simultaneous equations including the effects of FDI on carbon emission from size, structure, technology, and environmental regulation channels, this paper examines the impacts of FDI on China’s carbon emission through various channels. Results from provinces show that, FDI significantly increase regional carbon emissions through size, structure effects channels, FDI significantly reduce regional carbon emissions through technical effects channel, the regulation effects of FDI on local carbon emission is not significantly positive, and the combined result of a variety of effects show that, FDI has increased the total provincial carbon emissions. Industry analysis shows that, FDI will result in a significant growth in industry carbon emissions through scale, structure channels; through technology channels, FDI has a significant positive impact on carbon emissions abatement; through regulatory channels, FDI has a slight inhibition effect on industry carbon emission; combined results from different channels indicate that FDI has increased China’s industry carbon emissions.Thirdly, to compensate for the defects of existing research in effects of FDI spillover on carbon emissions, relying on existing classic literature related, this paper has sorted the main pathways and mechanism how FDI technology spillover influence host countries’carbon emission, has provided a more complete theoretical support for follow-up study. Then, placing35industrial sectors during1999-2008for the study, this paper has investigated the effect of FDI on the industry carbon emissions through horizontal technology spillover; and putting35industrial sectors during1999-2009as study object, using DEA-Malmqusit as the measure index of the industry carbon emissions efficiency, this paper has investigated the effect of FDI on the industry carbon emissions efficiency from horizontal technology spillover, forward technology spillover and backward technology spillover. The research on the horizontal technology spillover effects show that, whether competitive, demonstration effects or staff turnover effects, FDI horizontal technology spillover has reduced carbon emission of all sectors; however, FDI spillover effect from staff turnover is relative more significant. The research on the effects of horizontal, vertical technology spillover on carbon emission efficiency shows that, whether horizontal technology spillover or vertical technology spillover, FDI technology spillover can effectively improve the carbon emission efficiency in industry sectors, and there are some differences between different channels:in the horizontal technology spillovers, the positive impact from staff turnover is more significant; in the vertical technology spillovers, the positive impact from backward spillover is more significant.Finally, based on the theoretical mechanism and the empirical analysis, this paper has proposed some recommendations to achieve the low carbon economy development The recommendations are as fellow:the government should create the favorable conditions, and take the advantage of FDI’s threshold effect on "carbon abatement"; the government should inhibit the negative channels effects of FDI on carbon emission, and take full advantage of the positive channels’effects of FDI; the government should make the best use of FDI technology spillovers’positive impacts on carbon emission, carbon emission efficiency.