Can the coordinated development of two-way FDI promote carbon emission reduction? Evidence from industrial sectors in China

AbstractIn this study, the panel data of 34 industrial sectors are selected from 2004 to 2019 in China and empirically tested the carbon emission reduction effect and its transmission path during the coordinated development of two-way FDI. The results show that the coordinated development of two-way FDI in China's industrial sector had a significant but heterogeneous carbon emission reduction effect. The coordinated development of two-way FDI in high-yield scale groups, low-energy-consumption industries and high-tech industries had a stronger inhibitory effect on carbon emissions. When the coordinated development level of two-way FDI in China's industrial sector was high, its carbon emission reduction effect was more significant. After the Belt and Road Initiative was put forward in 2013, the carbon emission reduction effect of the coordinated development of two-way FDI in China's industrial industry was stronger. The mechanism test results showed that the coordinated development of two-way FDI in China's industrial sector mainly affected domestic carbon emissions through three transmission paths: scale, structure, and technology effects. Of these, the scale effect was positive, and the structure and technology effects were negative.KEYWORDS: Coordinated development of two-way FDIcarbon emission reductionsimultaneous equation modelsChina's industrial sectorsJEL Classifications: A10A1A Disclosure statementNo potential conflict of interest was reported by the author(s).Credit author statementAll the authors contributed to the study conception and design. Material preparation and data collection and analysis were performed by Y.Q., H.H. and J.W. The first draft of the manuscript was written by H.H. All authors have read and agreed to the published version of the manuscript.Data availabilityData will be made available on request.Additional informationFundingThis work was supported by the Hunan Provincial Philosophy and Social Science Planning Fund under Grant number 21ZDAJ007 and Collaborative Innovation Center for Emissions Trading system Co-constructed by the Province and Ministry under Grant number 22CICETS-ZD010 and 22CICETS-YB027.