This study evaluates the impact of outward foreign direct investment (OFDI), human well-being, and other macro indicators of the public sector on carbon footprint. Empirical analysis has been carried out for newly industrialized economies that span the period 1990–2017. We used augmented mean group and bootstrap panel causality techniques to cogitate the cross-sectional dependence and country-specific heterogeneity. Based on cross-country analysis, study results show that growing OFDI reduces carbon footprint efficiently in Mexico and Turkey, human well-being decreases emissions in the Philippines, and urbanization reduces emissions in China. Further, technology reduces emissions in Malaysia and Turkey, trade openness reduces emissions in China and Malaysia, and natural resource rents reduce emissions in Indonesia and Mexico. In the case of panel analysis, the moderating role of OFDI with human well-being is contributing toward a sustainable environment. Moreover, the moderation of OFDI and urbanization has an insignificant impact on CFP. Findings depict that interaction terms of OFDI with technology and trade openness have a positive association with the environment quality. Finally, OFDI and natural resources have positive moderation on CFP. This study contributes to the existing literature by suggesting policy implications for a sustainable environment.

The Contribution of Outward Foreign Direct Investment, Human Well-Being, and Technology toward a Sustainable Environment

This study examines the causal relationship between air pollution (AP) and outward foreign direct investment (OFDI) in China by applying the bootstrap rolling-window full- and subsample Granger causality test in a sample from 2013 to 2022. We find that AP negatively influenced OFDI in 2016, while this influence became positive at the end of 2019. The results confirm the coexistence of the pollution haven hypothesis, factor endowment hypothesis, and Porter hypothesis. In turn, OFDI negatively influenced AP in 2019, which proves the “composition effect” and “technique effect,” implying that OFDI brings better air quality by optimizing the economic structure and promoting green technology. However, this influence became positive in 2020, which is consistent with the “scale effect,” indicating that OFDI worsens air quality by expanding production. This research provides insights for the government to coordinate OFDI growth and carbon neutralization to achieve sustainable development. It also has implications for firms to reduce environmental costs through OFDI.

The Nexus Between Air Pollution and Outward Foreign Direct Investment

In the context of the new economic normal, environmental protection and economic growth have become the focus of academic attention. This paper explores the effect and impact mechanism of environmental regulations on the outward foreign direct investment (OFDI) of enterprises by using data from the China Industrial Enterprise Database and the Directory of Overseas Investment Enterprises (Institutions) for the years 2004 to 2010. The findings are summarised as follows. Firstly, environmental regulations have a significant positive effect on the OFDI of Chinese enterprises, and this result remains robust after considering the outcomes of robustness tests and endogeneity issues. Secondly, the promotion effect of environmental regulations on the OFDI of Chinese enterprises obviously differs across investment motivations and industry characteristics. Thirdly, productivity gains are important channels through which environmental regulations promote the OFDI of enterprises. These findings have great significance for the effective formulation of environmental regulatory policies and the stable development of the OFDI of Chinese enterprises. 

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Environmental regulations and outward foreign direct investment—empirical evidence from Chinese enterprises

The Yangtze River Basin occupies an important position in the overall layout of China’s economic development. However, due to the increasing water pollution, the environment of the Yangtze River Basin continues to deteriorate, which hinders the long-term development and sustainable development goals of the Yangtze River Economic Belt. Therefore, this study started from the perspective of the reduction of coordinated pollution carbon. Then, through empirical analysis, the impact of environmental regulation measures in the Yangtze River Basin on industrial pollution control was studied. At the same time, the spatial eigenvector mapping (SEVM) method was used to explore the spatial impact of environmental regulation on carbon emissions. The results showed that the increase in the intensity of environmental regulation would lead to the expansion of the hidden economy, which would lead to the effect of environmental regulation weakening. There was an inverted “U” relationship between per capita real gross domestic product (GDP) and environmental pollution indicators. In addition, the expansion of foreign trade in the Yangtze River Economic Belt hada less inhibitory effect on ecological environmental protection than a promotional one. At the same time, command-type environmental regulation had a “green paradox” effect on carbon emissions in the Yangtze River Basin. The carbon emission reduction effect of implicit environmental regulation was different under different levels of incentive-type environmental regulation. The research showed that the multi-agent governance model could be further constructed from the interaction between the environmental regulation system and the administrative management system. It had a good effect on the coordinated treatment of pollution reduction and carbon reduction under the “double carbon” goal.

https://www.mdpi.com/2071-1050/15/6/5094/pdf?version=1678771952

Collaborative Governance and Environmental Regulation Measures for Pollution Reduction and Carbon Reduction in the Yangtze River Basin under the “Double Carbon” Goal

The need to balance economic growth and its environmental impact continues to be a serious issue in China. As environmental regulation in China increases in importance, it is critical to understand how it impacts economic growth drivers such as outward foreign direct investment (OFDI) to formulate effective policies. One consideration should be the hidden economy, which can weaken the effects of environmental regulation on OFDI. This study investigates the scale of the hidden economy in 30 provinces and province-level municipalities in China in the period 2004 to 2015. The study uses the multiple indicators and multiple causes (MIMIC) model and the systematic generalized method of moments (GMM) test to analyze the impact of environmental regulation and the hidden economy on China's OFDI. The results show that stronger environmental regulation promotes OFDI. However, the hidden economy inhibits China's OFDI, as the positive effects of environmental regulation that drive OFDI are distorted. From a regional perspective, stronger environmental regulation promotes OFDI as well, while the hidden economy inhibits it. The interaction between environmental regulation and the hidden economy also inhibits it significantly.

Mengqi Gong

Papers

Environmental regulation, hidden economy, and China's outward foreign direct investment