Foreign Trade,FDI And China’s Carbon Emissions

Since Industrial Revolution, human beings were not in harmony with natural environment. Even though we made a great progress in economy and society in the short one hundred years, human beings damaged the environment heavily at the same time. After Industrial Revolution, all kinds of contaminations happened more often in the world, such as "Eight Detriments" and "Ten Events". It infests that environmental pollution and economic development have a contact relationship. Grossman and Krueger (1991) fund that relationship when they were studying the North America free trade. They put forward a famous Environmental Kuznets Theory, it means that environmental pollution and economic development have a relationship of a inverted U:with economic development, the level of environmental pollution will arise firstly and then come down. Based on this global background, studying the relationship between environmental pollution and economic development is very significant. In theses years,"the Greenhouse Effect" has become a global focus, how to control carbon emissions has become an international problem. As a worldwide country and a big country of carbon emission, China is faced with big pressure of reducing carbon emissions in order to maintain its image and realize its duty as a big country. Under this background, it is very meaningful to study China’s carbon emissions EKC. In addition, recently, studying foreign trade’s and FDI’s carbon emissions’effects has been a hotspot. For about that, based on studying China’s EKC about carbon emissions, this paper introduces two factors of foreign trade and FDI to study their influence on carbon emissions, which not only has meaning in theory but also has significant fact meaning.This paper finds several issues when reviewing the precedent references. One is theory issues, the precedent studies rarely consider overcoming "homogenization" hypothesis, the other is technological issues, the precedent studies also rarely consider the model’s right setting and its correction and cointegration test. So, based on the precedent studies, this paper overcomes the above issues and studies trade openness and FDI’s relationship with carbon emissions with provincial panel data from1991to2010. This paper tries to study whether the inverted U-shaped Environmental Kuznets Curve about per capita CO2exists in China and also to study trade openness and FDI’s relationship with carbon emissions. At the same time, the possible reasons to shape of China’s carbon emissions EKC and foreign trade’s and FDI’s carbon emissions’ effects are analyzed in this paper.This paper uses descriptive Statistics and Economitrics. Firstly, using descriptive Statistics, such as histogram and scatter diagram, to analyze the trend of national total indicators. Getting a conclusion that a significant relationship exists in per capita carbon emissions and per capita GDP, trade openness, FDI by using correlation analysis. Secondly, this paper chooses per one hundred million yuan GDP of carbon emissions and uses clustering analysis to overcome "homogeneity" hypothesis from its implication. Dividing twenty eight provinces into three groups and building panel regression for each group in order to test the shape of Chinese EKC of per capita carbon emission and study trade openness’s and FDI’s effects on Chinese carbon emission. Lastly, this paper uses descriptive Statistics, such as histogram and scatter diagram, and comparison analysis to analyze the mechanism behind China’s inverted U-shaped EKC about per capita carbon emissions and the reason of China’s foreign trade and FDI’s positive or negative effect on carbon emissions.According to this paper’s study, the main conclusions as follows:Firstly, the inverted U-shaped EKC does not exist in China by choosing per capita carbon emission as a pollution indicator."Homogeneity" must be considered when studying Environmental Kuznets. Short time span of the sample (there is no per capita carbon dioxide falling inflection point) and the deficiency of environmental policies and economic policies for reducing carbon emissions are the cause of China’s inverted U-shaped EKC about per capita carbon emissions. Secondly, China’s foreign trade has positive effect on carbon emissions, but FDI has adverse effect. These effects are the results of comprehensive action by foreign trade and FDI’s scale effect, structure effect and technological effect. Thirdly, economic development is the crucial factor to influence China’s per capita carbon dioxide emissions, then foreign trade and FDI are the inferior factors.Regarding to predecessors’studying shortcomings, this paper innovates in four aspects. Firstly, in theory, tins paper chooses a different indicator and method to conquer "homogeneity" hypothesis when studying China’s carbon emissions EKC. Secondly, this paper based on EKC theory studies China’s foreign trade’s and FDI’s effects to carbon emissions. Thirdly, in technology, in order to get a fittest model, this paper roundly considers model’s setting, the removal to autocorrelation and heteroscedasticity, panel unit root test and cointegration test. Forth, this paper analyzes the possible reasons, which are very essential to provide some constructive policies and suggestions, to the results of regression, but this work was rarely considered by the predecessors when they were doing empirical research.This paper’s shortcomings are as follows:this paper just figures out foreign trade’s and FDI’s total effects to carbon emissions but cannot calculates their scale effects, structural effects and technological effects, which may influence us to judge in policies to some extent.