The impact of foreign direct investment on China's industrial carbon emissions based on the Threshold Model

Abstract

In recent years, countries around the world are significantly increasing their awareness of environmental protection. With a continuous expansion of economic scale, many emerging markets are also sustainably enhancing their standards for industrial carbon emissions in foreign direct investment (FDI). Therefore, the impact of FDI on the host country's industrial carbon emissions has always been a hot topic of researches by scholars. This paper selects panel data of 30 medium and large cities in China from 2006 to 2019, combined with dynamic panel GMM estimation and panel threshold model, and empirically analyzes the impact factors of FDI on the host country’s industrial carbon emissions from the perspective of dual environmental management systems. This paper draws the following conclusions: When taking the formal and informal environmental management system factors as threshold variables into the empirical research process, only the FDI in Beijing, Tianjin, and Shanghai shows a certain inhibitory effect on Chinese industrial carbon emissions. The FDI in other cities increases the scale of industrial carbon emissions. At the same time, in the formal environmental management system, FDI has no significant impact on Chinese industrial carbon emissions. It indicates that the formal environmental management system of each city is not effective in policy formulation or implementation, and it is not able to play the role of innovative compensation and forced emission reduction of the environmental management system. With the exception of Beijing and Shanghai, informal environmental management systems in other cities help curb the scale of industrial carbon emissions brought about by FDI.