How do FDI inflows curvilinearly affect carbon emissions? Threshold effects of energy service availability and cleanliness

Abstract

To examine the relationship between foreign direct investment (FDI) inflows and carbon emissions from the perspective of the threshold effects of energy service availability and energy consumption cleanliness, this study employs the panel data of 16 Regional Comprehensive Economic Partnership member countries for the period 1990–2019. Using panel threshold models, this study finds that energy service availability and energy consumption cleanliness are two significant threshold variables in the process by which FDI inflows affect carbon emissions. Before they reach a certain level, FDI inflows aggravate carbon emissions, but this association becomes negative after reaching the threshold level. Furthermore, this study also indicates that the threshold values are different depending on national conditions. Specifically, countries with favourable technological development or stronger environmental regulations have lower threshold values for the two variables, while countries with a higher degree of industrial added value have higher threshold values. Based on these findings, this study recommends enhancing energy service availability and energy consumption cleanliness and formulating related industrial, technological and legal policies based on different national conditions.