China’s Outward FDI and Globalization’s Impact on CO2 Emissions: A Cross-Country Panel Data Analysis

Abstract

Carbon emissions and climate change pose significant threats to lives on Earth. Environmental degradation has become a pressing concern, endangering millions of lives. Rising carbon emissions are driving global warming and erratic climate patterns exacerbating the crises. Against the backdrop of China’s remarkable economic rise, this study investigates the relationship between Chinese outward foreign direct investment (FDI), globalization, and carbon emissions (CO2) across 102 countries from 2003 to 2018. Utilizing panel data techniques, we explore the determinants of CO2 emissions globally. Our findings indicate that energy consumption, gross domestic product (GDP), and financial development significantly increase CO2 emissions, with coefficients of 0.899, 0.083, and 0.033 respectively. These results underscore the trade-off between economic development and environmental degradation. Conversely, trade openness and China’s outward FDI negatively affect CO2 emissions. However, globalization reflects a positive linkage with carbon emissions. We advocate for trade openness to enhance investments in cleaner production and green technologies for sustainable development. Additionally, the negative linkage between China’s outward FDI and CO2 emissions suggests that Chinese companies adopt environmentally friendly technologies in their operations abroad, contributing to environmental preservation in host countries. © The Author(s), under exclusive licence to Springer Science+Business Media, LLC, part of Springer Nature 2024.