Does foreign direct investment lead to lower CO2 emissions? Evidence from a regional analysis in China

Existing studies have been concerned with the relationship between foreign direct investment and CO2 emissions in recent years. However, little attention has been paid to regional differences in China. This paper investigates the impact of FDI on China׳s CO2 emissions at the national and regional levels using provincial panel data from 1995 to 2010. The Stochastic Impacts by Regression on Population, Affluence, and Technology (STIRPAT) model was adopted. The results suggest that FDI contributes to CO2 emission reductions in China. FDI׳s impact on CO2 emissions decreases from the western region to the eastern and central regions. Our findings support the pollution halo hypothesis, which claims that foreign firms can export greener technologies from developed to developing countries and conduct business in an environmentally friendly manner.