The carbon reduction effect of China’s outward foreign direct investment for carbon neutrality target

Abstract

Based on mainland China's provincial OFDI and carbon emissions data from 2003 to 2018, this paper applied a panel fixedeffects model and spatial econometric model to empirically test whether China's OFDI can be a powerful tool to achieve the "carbon neutrality" target. The empirical results indicate that China's OFDI significantly increases carbon emissions, but this effect has temporal and spatial differences. After incorporating spatial factors into the analysis, the impact of OFDI on carbon emissions differs when modelled by different spatial weight matrices. The green effect of OFDI has the problem of poor channels. It is impossible to achieve energy savings and emission reduction by promoting green technology innovation, improving the rationalization of the industrial structure or reducing energy consumption. The test results of the moderating effect indicate that the development of green finance can weaken the positive effect of OFDI on emissions.

The Comprehensive Impact of Outward Foreign Direct Investment on China’s Carbon Emissions

“…According to the <World Investment Report 2021> released by the United Nations Conference on Trade and Development (UNCTAD), China's OFDI was the highest in the world, reaching USD 153.7 billion starting in 2020. Therefore, OFDI, as an important carrier of global technology and industry transfer, will significantly impact the success of China's carbon emission reform [6] (Zhang et al, 2022b).…”