Skip to main content

Advertisement

SpringerLink
Log in

Has the development of FDI and foreign trade contributed to China’s CO2 emissions? An empirical study with provincial panel data

  • Original Paper
  • Published:
Natural Hazards Aims and scope Submit manuscript

Abstract

Since the reform and opening up in 1978, China’s foreign direct investment (FDI) and foreign trade have grown rapidly. At the same time, China’s carbon dioxide (CO2) emissions surged and China has become the world’s biggest CO2 emitter. The purpose of this paper is to investigate the relationship between FDI, foreign trade and carbon dioxide emissions in China. Using a two-equation model adapted from Halkos and Paizanos (Ecol Econ 91:48–56, 2013), the total impacts of FDI and foreign trade on emission are divided into the direct and indirect impacts and estimated accordingly. The estimation results suggest that the total impact FDI on per capita CO2 emissions is negative. Concretely, the negative direct effect of FDI on carbon emissions dominates the positive indirect effect through FDI’s influence on per capita GDP. However, for foreign trade, both direct and indirect impacts on CO2 emissions are insignificant after taking consideration of potential endogeneity and introducing dynamics.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Fig. 1

Similar content being viewed by others

Notes

  1. To save space, only regression equations for FDI are represented here. The regression equations for foreign trade are similar, and the only difference is to substitute FDI with foreign trade. For the same reason, in following Eq. (3) and Fig. 1, FDI is used, but we could also simply use foreign trade to replace FDI as the research target.

  2. The similar forms of production function with domestic capital stock or investment and FDI as different input factors have been utilized in several researches, including Madariaga and Poncet (2007), Yao and Wei (2007), Lan et al. (2012), and Yang et al. (2013).

  3. According to the estimations of the CDIAC and Liu et al. (2009), CO2 emissions from cement production account for approximately 10–15 % of total CO2 emissions in China.

  4. It has long been recognized that the development of foreign trade is one of the growth engines in China (e.g., Lardy 1992; Chen and Feng (2000). There has been also rich studies on the contribution of FDI on China’s economic growth (e.g., Berthélemy and Demurger 2000; Zhang 2001; Yao and Wei 2007).

References

  • Al-mulali U, Foon Tang C (2013) Investigating the validity of pollution haven hypothesis in the gulf cooperation council (GCC) countries. Energy Policy 60:813–819

    Article  Google Scholar 

  • Arellano M, Bond S (1998) Dynamic Panel Data Estimation Using DPD98 for GAUSS, Mimeo. Institute for Fiscal Studies, London

    Google Scholar 

  • Arellano M, Bover O (1995) Another look at the instrumental variable estimation of error-components models. J Econom 68:29–51

    Article  Google Scholar 

  • Berthélemy JC, Demurger S (2000) Foreign direct investment and economic growth: theory and application to China. Rev Dev Econ 4(2):140–155

    Article  Google Scholar 

  • Bond S, Hoeffler A, Temple J (2001) GMM estimation of empirical growth models. CEPR Discussion Paper, No. 3048

  • Branstetter LG, Feenstra RC (2002) Trade and foreign direct investment in China: a political economy approach. J Int Econ 58(2):335–358

    Article  Google Scholar 

  • Chen B, Feng Y (2000) Determinants of economic growth in China: private enterprise, education, and openness. China Econ Rev 11(1):1–15

    Article  Google Scholar 

  • Cole MA (2004) Trade, the pollution haven hypothesis and the environmental Kuznets curve: examining the linkages. Ecol Econ 48(1):71–81

    Article  Google Scholar 

  • Cole MA, Elliott RR (2003) Determining the trade—environment composition effect: the role of capital, labor and environmental regulations. J Environ Econ Manag 46(3):363–383

    Article  Google Scholar 

  • Copeland BR, Taylor M (1994) North-South trade and the environment. Quart J Econ 109(3):755

    Article  Google Scholar 

  • de Mello LR Jr (1997) Foreign direct investment in developing countries and growth: a selective survey. J Dev Stud 34(1):1–34

    Article  Google Scholar 

  • Eskeland GS, Harrison AE (2003) Moving to greener pastures? Multinationals and the pollution haven hypothesis. J Dev Econ 70(1):1–23

    Article  Google Scholar 

  • Grossman G, Krueger A (1991) Environmental impacts of the North American Free Trade Agreement. NBER Working paper, No. w3914

  • Grossman G, Krueger A (1995) Economic growth and the environment. Quarterly J Econ 110:353–377

  • Halkos GE, Paizanos EΑ (2013) The effect of government expenditure on the environment: an empirical investigation. Ecol Econ 91:48–56

    Article  Google Scholar 

  • Hao Y, Liao H, Wei YM (2014). China’s fiscal decentralization and environmental quality: theory and an empirical study. Discussion paper of Beijing Institute of Technology

  • He D, Zhang W, Shek J (2007) How efficient has been China’s investment? Empirical evidence from national and provincial data. Pac Econ Rev 12:597–617

    Article  Google Scholar 

  • International Panel on Climate Change (IPCC) (2006) IPCC guidelines for national greenhouse gas inventories. Institute for Global Environmental Strategies, Hayama, Kanagawa, Japan

  • Kearsley A, Riddel M (2010) A further inquiry into the pollution haven hypothesis and the environmental Kuznets curve. Ecol Econ 69(4):905–919

    Article  Google Scholar 

  • Lan J, Kakinaka M, Huang X (2012) Foreign direct investment, human capital and environmental pollution in China. Environ Resour Econ 51(2):255–275

    Article  Google Scholar 

  • Lardy N (1992) Foreign trade and economic reform in China, 1978–1990. Cambridge University Press, New York

    Google Scholar 

  • Leontief W (1970) Environmental repercussions and the economic structure: an input–output approach. Rev Econ Stat 52(3):262–271

    Article  Google Scholar 

  • Liu X, Wang C, Wei Y (2001) Causal links between foreign direct investment and trade in China. China Economic Review 12(2):190–202

    Article  Google Scholar 

  • Liu X, Burridge P, Sinclair PJ (2002) Relationships between economic growth, foreign direct investment and trade: evidence from China. Appl Econ 34(11):1433–1440

    Article  Google Scholar 

  • Liu Y, Kuang Y, Huang N, Wu Z, Wang C (2009) CO2 emission from cement manufacturing and its driving forces in China. Int J Environ Pollut 37(4):369–382

    Article  Google Scholar 

  • Madariaga N, Poncet S (2007) FDI in Chinese cities: spillovers and impact on growth. World Econ 30(5):837–862

    Article  Google Scholar 

  • Mizgajski JT (2013) CO2 embodied in trade between Poland and Selected Countries. J Econ Dev Environ People 2(4):48–60

    Google Scholar 

  • Mutafoglu TH (2012) Foreign direct investment, pollution, and economic growth evidence from Turkey. J Dev Soc 28(3):281–297

    Google Scholar 

  • Peters GP, Hertwich EG (2006) Pollution embodied in trade: The Norwegian case. Global Environ Change Part A Hum Policy Dimensions 16(4):379–387

    Article  Google Scholar 

  • Ren S, Yuan B, Ma X, Chen X (2014a) The impact of international trade on China's industrial carbon emissions since its entry into WTO. Energy Policy 69:624–634

    Article  Google Scholar 

  • Ren S, Yuan B, Ma X, Chen X (2014b) International trade, FDI (foreign direct investment) and embodied CO2 emissions: a case study of Chinas industrial sectors. China Econ Rev 28:123–134

    Article  Google Scholar 

  • Sánchez-Chóliz J, Duarte R (2004) CO2 emissions embodied in international trade: evidence for Spain. Energy Policy 32(18):1999–2005

    Article  Google Scholar 

  • Shui B, Harriss RC (2006) The role of CO2 embodiment in US–China trade. Energy Policy 34(18):4063–4068

    Article  Google Scholar 

  • Wyckoff AM, Roop JM (1994) The embodiment of carbon in imports of manufactured products: implications for international agreements on greenhouse gas emissions. Energy Policy 22(3):187–194

    Article  Google Scholar 

  • Yang B, Brosig S, Chen J (2013) Environmental impact of foreign vs. domestic capital investment in China. J Agric Econ 64(1):245–271

    Article  Google Scholar 

  • Yao S (2006) On economic growth, FDI and exports in China. Appl Econ 38(3):339–351

    Article  Google Scholar 

  • Yao S, Wei K (2007) Economic growth in the presence of FDI: the perspective of newly industrialising economies. J Comp Econ 35(1):211–234

    Article  Google Scholar 

  • Yunfeng Y, Laike Y (2010) China’s foreign trade and climate change: a case study of CO2 emissions. Energy Policy 38(1):350–356

    Article  Google Scholar 

  • Zhang KH (2001) How does foreign direct investment affect economic growth in China? Econ Transit 9(3):679–693

    Article  Google Scholar 

  • Zhang KM, Wen ZG (2008) Review and challenges of policies of environmental protection and sustainable development in China. J Environ Manag 88(4):1249–1261

    Article  Google Scholar 

  • Zhou XY, Zhang J, Li JP (2012) Industrial structural transformation and carbon dioxide emissions in China. Energy Policy 57:43–51

    Article  Google Scholar 

Download references

Acknowledgments

The authors acknowledge the financial support from the National Natural Science Foundation of China (71403015) and Fundamental Research Fund of Beijing Institute of Technology (20132142014).

Author information

Authors and Affiliations

  1. Center for Energy and Environmental Policy Research, Beijing Institute of Technology, Beijing, 100081, China

    Yu Hao & Yi-Ming Liu

  2. School of Management and Economics, Beijing Institute of Technology, Beijing, 100081, China

    Yu Hao & Yi-Ming Liu

Authors
  1. Yu Hao
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Yi-Ming Liu
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Yu Hao.

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Hao, Y., Liu, YM. Has the development of FDI and foreign trade contributed to China’s CO2 emissions? An empirical study with provincial panel data. Nat Hazards 76, 1079–1091 (2015). https://doi.org/10.1007/s11069-014-1534-4

Download citation

  • Received:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s11069-014-1534-4

Keywords

Search

Navigation