The Impact of Economic Growth, FDI and Energy Intensity on China’s Manufacturing Industry’s CO2 Emissions: An Empirical Study Based on the Fixed-Effect Panel Quantile Regression Model

Abstract

Since the reform and opening-up, China’s CO2 emissions have increased dramatically, and it has become the world’s largest CO2 emission and primary energy consumption country. The manufacturing industry is one of the biggest contributors to CO2 emission, and determining the drivers of CO2 emissions are essential for effective environmental policy. China is also a vast transition economy with great regional differences. Therefore, based on the data of China’s provincial panel from 2000 to 2013 and the improved STIRPAT model, this paper studies the impact of economic growth, foreign direct investment (FDI) and energy intensity on China’s manufacturing carbon emissions through the fixed-effect panel quantile regression model. The results show that the effects of economic growth, FDI and energy intensity on carbon emissions of the manufacturing industry are different in different levels and regions, and they have apparent heterogeneity. In particular, economic growth plays a decisive role in the CO2 emissions of the manufacturing industry. Economic growth has a positive impact on the carbon emissions of the manufacturing industry; specifically, a higher impact on high carbon emission provinces. Besides, FDI has a significant positive effect on the upper emission provinces of the manufacturing industry, which proves that there is a pollution paradise hypothesis in China’s manufacturing industry, but no halo effect hypothesis. The reduction of energy intensity does not have a positive effect on the reduction of carbon emissions. The higher impact of the energy intensity of upper emission provinces on carbon emissions from their manufacturing industry, shows that there is an energy rebound effect in China’s manufacturing industry. Finally, our study confirms that China’s manufacturing industry has considerable space for emission reduction. The results also provide policy recommendations for policymakers.