The impact of foreign direct investment on China's carbon emission efficiency through energy intensity and low-carbon city pilot policy

Abstract

The rapid growth of foreign direct investment (FDI) has had a significant impact on rapid economic development and environmental pollution in China. Nonetheless, the underlying mechanism and empirical evidence of FDI impact on carbon emission efficiency have not been systematically explored. Therefore, this study investigates the impact of FDI on carbon emission efficiency via energy intensity, as well as the moderating role of the Low-Carbon City Pilot Policy (LCCP) in the process. We found that: (1) During the study sample period, the average carbon emission efficiency tends to rise, however, there remains a gap between the optimal carbon emission efficiency; (2) FDI is one of the key factors that inhibit the improvement of carbon emission efficiency, with a non-linear relationship between them; (3) FDI indirectly suppresses the improvement of carbon emission efficiency by promoting energy intensity. Nevertheless, the implementation of LCCP has a positive effect on carbon emission efficiency; (4) The implementation of LCCP has improved the negative impact of FDI on carbon emission efficiency, nonetheless, it cannot significantly influence the process that FDI affects carbon emission efficiency through energy intensity. Thus, we propose improvement measures from three aspects, i.e., increasing the introduction of foreign capital, adjusting the energy consumption structure, and expanding the scope of low-carbon cities.