Foreign Direct Investment and Carbon Emission Efficiency: The Role of Direct and Indirect Channels

Abstract

A large number of foreign direct investment inflows not only promote China’s economic development but also bring environmental pollution problems., Improving carbon emission efficiency and cutting carbon emissions while maintaining China’s attractiveness to foreign investment has become a topic of concern in China. Firstly, this paper measures the carbon emission efficiency of different provinces in China with the super efficiency DEA model and studies the temporal and spatial characteristics of carbon emission efficiency. Secondly, the impact of FDI on carbon emission efficiency is investigated. FDI negatively affects carbon emissions but positively affects carbon emission efficiency. In addition, the interaction term of FDI and each channel negatively affects carbon emission efficiency, indicating that each channel has a negative impact on the relationship between FDI and carbon emission efficiency. Thirdly, the results of the sub-sample analysis show that the impact of FDI on carbon emission efficiency has the feature of regional heterogeneity. Based on the results, policy implications regarding the improvement of carbon emission efficiency are proposed.