The Impact of Urbanization on CO2 Emissions in China: The Key Role of Foreign Direct Investment

By adopting the dynamic panel threshold approach, this study assesses how foreign direct investment (FDI) shapes the causality between urbanization and CO2 emissions in China from 1996-2018. The results suggest that a rise in the pace of urbanization increases CO2 emissions, but this harmful effect becomes weaker after achieving a certain level of foreign capital. We also find that the more developed the technology, financial and government sectors, the more it can promote urbanization to reduce CO2 emissions. These results offer policy implications for China's urban planning and environmental policy.

Automated summary

This study examines the relationship between foreign direct investment (FDI), urbanization, and CO2 emissions in China from 1996 to 2018 using the dynamic panel threshold approach. The findings suggest that urbanization leads to an increase in CO2 emissions, but this effect diminishes after a certain level of foreign capital is reached. Additionally, the development of technology, finance, and government sectors can promote urbanization and reduce CO2 emissions. These results have significant policy implications for China's urban planning and environmental policies.