Carbon Emissions and Its Relationship with Foreign Trade Openness and Foreign Direct Investment

Abstract

Previous research has investigated the connections between foreign direct investment (FDI), carbon emissions (CO2), and foreign trade openness. However, these past studies did not specifically focus on industrial sectors in China and their carbon emissions, thus leaving a gap in understanding this relationship. In our study, we aim to contribute to the existing body of knowledge by employing a threshold regression model with a threshold variable. This model calculates how strongly carbon emissions are produced to assess the impact of the industrial sector on carbon emissions. Our findings reveal that foreign trade openness and FDI have a threefold threshold impact on industrial carbon emissions. The effect of FDI on carbon emissions in the industrial sector shows a pattern of initially lowering and then increasing the emissions, indicating potential harm. Conversely, the impact of foreign trade openness on carbon emissions exhibits both positive and negative effects. While foreign trade openness exacerbates carbon emissions in economic sectors with lower carbon intensity, it helps mitigate emissions in sectors with high- carbon emission levels. Furthermore, our study identifies that the intensity of economic activity, per capita GDP, and the number of employees all significantly influence the industrial sector’s carbon emissions. By employing the latest cutting-edge methodology, our research opens the door for extrapolating these findings to other nations for a comprehensive analysis.