Heterogeneous Environmental Regulation, Foreign Direct Investment, and Regional Carbon Dioxide Emissions: Evidence from China

Abstract

As an important means to reduce carbon dioxide (CO2) emissions, environmental regulation (ER) and foreign direct investment (FDI) have become popular research topics in recent years. Most studies have examined the single impact of ER or FDI on CO2 emissions, while few investigated the regional heterogeneity and the spillover effect of different environmental regulations (ERs) on CO2 emissions and neglected the impact of the interaction mechanism between ER and FDI on CO2 emissions. This paper applies the spatial Durbin model (SDM) to explore the impact of different ERs and FDIs on regional CO2 emissions in China’s 30 provinces from 2003 to 2019. The results indicate that there are significant differences and regional heterogeneity in the effects of different environmental regulations on CO2 emissions at the national level. FDI has a significant promoting effect on CO2 emissions in the early years (2003–2009), especially in the eastern and western regions, but its effect is not significant in the late period (2010–2019). At the regional level, the abatement effects of the interaction term between FDIs and ERs are generally significant, indicating that ERs can influence the reduction effect of FDIs. Regulatory environmental regulation (RER) in the eastern region, command environmental regulation (CER), and economic environmental regulation (EER) in the central region can significantly affect the emission reduction effect of local FDI.