Study On The Relationship Between FDI And Carbon Emissions

At present, China’s annual emissions of carbon dioxide has surpassed the U.S. as theworld’s largest carbon emitter, in2011China’s total carbon emissions accounted for28%oftotal world. China is facing the dual pressures of domestic environmental degradation andinternational demands for increase energy conservation efforts. In the context of economicglobalization, the reason for China’s carbon emissions growing so rapidly,on one hand isrelated to the irrational existing economic structure, the economic growth mode and theeconomic growth mode, but on the other hand may also be connected with an increasinglyliberalized international trade and international capital flows. Yangtze River Delta region hasbecome the main gathering area of international capital, in201150%of FDI in our countryflowed in this area. Most of FDI invested in manufacturing, benefiting a lot to the economicgrowth, while also worsened the local environment, more and more people start focusing onthese problems.In this paper, we put the Yangtze River Delta as the research object, and the researchpoint is to figure out the relationship between this region’s FDI and carbon emissions. Firstlywe review the past research results and then analyze the previous and present situations of theregion’s FDI and carbon emissions, then we could see that most previous studies put theirresearch point on one aspect of effects of FDI on environment, and their papers based on onesingle economic theory such as EKC Curve, Pollution Haven Hypothesis, Pollution HaloHypothesis, Porter Hypothesis and so on, while this method could explain the points ofresearchs,we cannot ignore the possibility of other aspects that FDI may effect theenvironment. In order to figure out the relationship between FDI and the host countries’environment in a more comprehensive way and based on a careful comparison of thesetheories, this paper chose the Effect Decomposition Model Theory to analyze the relationshipbetween the Yangtze River Delta region’s FDI and carbon emissions from four aspects, scaleeffect, structure effect, technical effect and the effect of regulation. We draw some tentativeconclusions in the theoretical analysis. In the part of empirical research, we build asimultaneous equations model to test the region’s panel data from1999to2011. The resultsshow that, the scale effect of FDI in Yangtze River Delta region is negative,1%increased inFDI stock will lead to0.1554%increased in carbon emissions, FDI deteriorate theenvironment through economic expansion; the structure effect is also negative, FDI inflowsdid not significantly improve the region’s industrial structure, and also failed to reduce theregion’s carbon emissions, the impact factor is0.0334, indicating that FDI gather in heavypollution industries; the effect of regulation’s elasticity is0.0363, indicating that the region’senvironmental protection system is imperfect and there is inadequate environmental controlsphenomenon. While the technical effect of FDI is positive due to the entry of FDI has broughta certain amount of advanced environmental technologies and environmental managementexperience, FDI increased by1%can effectively reduce0.0496%carbon emissions volume.However the overall effect of FDI in this region still increase the CO2emissions volume, thatper1%increase in FDI, it will generate up0.1756%of CO2.In the last part of this paper, we summarize the main research findings and then putforward some countermeasures and suggestions on how to further strengthen the management of FDI and coordinate the relationship among FDI and carbon emissions.