Pollution haven or halo? The role of the energy transition in the impact of FDI on SO2 emissions

Abstract

This paper explores how the relationship between FDI and SO2 emissions has been affected by the energy transition. We applied a semi-parametric method to a STIRPAT model using Chinese provincial panel data from 2002 to 2016 to conduct an empirical analysis of FDI and SO2 emissions and analyze the effects of FDI on the energy transition. We found that FDI and SO2 emissions are characterized by an inverted U-shaped relationship; FDI and coal consumption have an inverted U-shaped relationship, and FDI and natural gas consumption have a U-shaped relationship. Moreover, the use of coal significantly increases SO2 emissions while the use of natural gas significantly reduces them. Our research shows that technological advances have increased coal consumption and that there has been no reduction of SO2 emissions in China. Overall, our analysis provides mixed support for the pollution haven and pollution halo hypotheses.