The impact of FDI on industrial structure upgrading and carbon emission under the constraints of environmental regulation

Abstract

ABSTRACT Foreign direct investment (FDI) plays an important role in promoting industrial structure and curbing carbon emission. The study is based on panel data from 30 provinces in China from 2011 to 2021 and verifies the impact of FDI under environmental regulation on industrial structure upgrading and carbon emission. The empirical results show that FDI under environmental regulation can inhibit carbon emission and promote industrial structure upgrading. The carbon emission reduction effect and industrial structure upgrading effect of FDI show regional heterogeneity, with the strongest effect in the eastern region, followed by the central region, and no significant effect in the western region. The moderating effect examination of environmental regulation illustrates that formal and informal environmental regulation can effectively regulate the relationship between FDI and carbon emission, but due to differences in various factors such as economic development level and population quality, the moderating effect also exhibits regional heterogeneity. In the mechanism test, industrial structure upgrading plays a perfect mediating role in the path of FDI inhibiting carbon emission, and environmental regulation can further enhance the mediating effect of industrial structure upgrading. There is a threshold of industrial structure upgrading between FDI and carbon emission, and FDI can only suppress carbon emission after crossing the threshold of industrial structure upgrading.