The effects of different forms of FDI on the carbon emissions of multinational enterprises: A complex network approach

Abstract

The carbon emissions of multinational enterprises (MNEs) through FDI are causing a shift in the emissions burden and threatening mitigation targets. The purpose of this paper is to investigate the effects of the FDI stock, greenfield FDI, and M&As on carbon emissions of MNEs from 2005 to 2016 via quadratic assignment procedure (QAP) network analysis. Through QAP network analysis, we study the FDI-carbon emissions linkage considering the interactions among agents. The results show that the “high-income region to low-income region” mode is gradually becoming the driving force in the global carbon flow, producing lots of carbon emissions with a lower investment. The investments in this mode are dirtier. Second, financial institutions have become the key emitters of global carbon emissions through FDI. This investment model makes global carbon transfer indirect and concealed. Third, the significance of the impacts of the three forms of FDI on the carbon emissions of MNEs is positive, which confirms the pollution haven effect. The greatest contributor is the FDI stock, which comes from historical investments in high-income regions. Greenfield FDI is more influential than M&As in both high- and low-income regions. This paper is a valuable reference for understanding the environmental effects of FDI.