Foreign direct investment and carbon emissions in China: “Pollution Haven” or “Pollution Halo”? Evidence from the NARDL model

Abstract

Based on nonlinear autoregressive distributed lagged (NARDL) model, FDI is divided into two shocks (FDI+ and FDI−) to analyze its impacts on China’s carbon emissions. Outcomes confirm that: in the short-term, FDI+ notably promoted China’s carbon emissions, while FDI− shed no significant light on it; in the long-term, both FDI+ and FDI− significantly accelerate China’s carbon emissions, and the promoting effect from FDI− is much higher. “Pollution Haven” effect was validated in both the long- and short-term. Meanwhile, China’s carbon emissions showed a “U-shaped” relationship with economic development, and were positively related to population growth and energy intensity. Therefore, FDI should be carefully guided into energy-saving and clean-production industries and technologies, while FDI introduced into energy-intensive fields should be strictly scrutinized and higher taxes levied, to reduce carbon emissions. Policies oriented towards energy transformation, such as promoting new renewable energy and energy efficiency improvements, should be given greater priority in the future.