Effect Of FDI On China's Carbon Emissions

China has become the major emitter. The carbon emissions may be associatedwith not only the model of China’s economic development but also FDI (ForeignDirect Investment). The purpose of this paper is to test empirically the effect of FDIon the carbon emissions, and put forward relevant policy suggestions of utilizing FDIto reduce our country’s carbon emissions.The theme of this paper is the effect of FDI on carbon emissions in China withpollution heaven hypothesis, industrial transfer theory and the Potter hypothesisas the theoretical bases. This paper systematically analyzes the current situations ofFDI and carbon emissions with a lot of statistical data.In the part of theoretical analyses, this paper analyzes the effect of FDI oncarbon emissions in China from both positive and negative ways，finally it isconcluded that the comprehensive effect of FDI on carbon emissions is positive. Onone way, FDI produces positive effect on China’s carbon emissions through technicaleffect, the optimization of the industry structure and the income effect. On the otherway, FDI produces negative effect on China’s carbon emissions through thecontroversial technology transfer, high carbon industries transfer and the scale effect.In the part of empirical analyses, this paper selects the time series data from1983to2011and constructs a model based on the decomposition of the model ofcarbon to test the effect of FDI on carbon emissions. Through the empirical analyses,this paper yields the following conclusions: FDI has a positive effect on carbonemissions, when the proportion of FDI in gross capital formation increases by1%,per capita carbon emissions will decrease by about0.07%; FDI has a positive effecton energy structure and energy technical level, and this can partly explain why FDIhas a positive comprehensive effect on carbon emissions. Finally, this paper putsforward some policy suggestions.