Nexus between foreign direct investment, trade openness, and carbon emissions: fresh insights using innovative methodologies

Abstract

AbstractPrevious research has explored the relationship between carbon emissions, trade openness, and foreign direct investment (FDI), but these studies have not specifically examined carbon emissions using sector-level data. This paper expands upon the existing body of literature by employing a threshold regression approach, utilizing the intensity of carbon emissions as a primary variable to scrutinize the effects of FDI and trade openness on carbon emissions at a sectoral level. Our findings indicate that the impact is contingent upon the chosen thresholds, thereby underscoring the influence of foreign trade openness and FDI on carbon emissions within the industrial sector. The effect of FDI on sector-specific industrial carbon emissions is not constant, with the influence coefficient varying over time. In contrast, trade openness positively and negatively impacts carbon emissions. Specifically, increased foreign trade openness leads to a decrease in carbon emissions in less carbon-intensive sectors. Factors such as the intensity of economic activity, employment levels, independent technical innovation, and per capita GDP significantly influence carbon emissions within industrial sectors.

Keywords

• Carbon emissions
• foreign trade openness
• foreign direct investment
• threshold regression approach
• threshold influence
• threshold regression