Can the coordinated development of two-way FDI promote carbon emission reduction? Evidence from industrial sectors in China

Abstract

In this study, the panel data of 34 industrial sectors are selected from 2004 to 2019 in China and empirically tested the carbon emission reduction effect and its transmission path during the coordinated development of two-way FDI. The results show that the coordinated development of two-way FDI in China's industrial sector had a significant but heterogeneous carbon emission reduction effect. The coordinated development of two-way FDI in high-yield scale groups, low-energy-consumption industries and high-tech industries had a stronger inhibitory effect on carbon emissions. When the coordinated development level of two-way FDI in China's industrial sector was high, its carbon emission reduction effect was more significant. After the Belt and Road Initiative was put forward in 2013, the carbon emission reduction effect of the coordinated development of two-way FDI in China's industrial industry was stronger. The mechanism test results showed that the coordinated development of two-way FDI in China's industrial sector mainly affected domestic carbon emissions through three transmission paths: scale, structure, and technology effects. Of these, the scale effect was positive, and the structure and technology effects were negative.