Carbon emissions and the rising effect of trade openness and foreign direct investment: Evidence from a threshold regression model

Omer Faruk Derindag; Alina Maydybura; Akash Kalra; Wing-Keung Wong; Bisharat Hussain Chang

doi:10.1016/j.heliyon.2023.e17448

Carbon emissions and the rising effect of trade openness and foreign direct investment: Evidence from a threshold regression model

Heliyon. 2023 Jun 26;9(7):e17448. doi: 10.1016/j.heliyon.2023.e17448. eCollection 2023 Jul.

Authors

Omer Faruk Derindag¹, Alina Maydybura², Akash Kalra³, Wing-Keung Wong^{4

5

6}, Bisharat Hussain Chang⁷

Affiliations

¹ Department of International Trade and Business, Inonu University, Battalgazi, Malatya, Turkey.
² Department of Business and Management, RIT Dubai, Dubai, United Arab Emirates.
³ Brandeis International Business School, Waltham, MA, United States.
⁴ Department of Finance, Fintech & Blockchain Research Center, and Big Data Research Center, Asia University, Taiwan.
⁵ Department of Medical Research, China Medical University Hospital, China.
⁶ Department of Economics and Finance, The Hang Seng University of Hong Kong, China.
⁷ Department of Business Administration, Sukkur IBA University, Sukkur, Pakistan.

Abstract

The relationship between carbon emissions, foreign trade openness, and FDI has been studied in prior studies. The previous studies, however, did not examine the link by focusing on carbon emissions in India's industrial sectors. Using carbon emission intensity as a threshold variable and a threshold regression model, we add to the existing studies by assessing the influence of India's industrial sector on carbon emissions. According to the study's findings, there are three threshold effects of foreign direct investment and foreign trade openness on industrial carbon emissions. FDI harms industrial carbon emissions, as it has a characteristically declining and then rising effect coefficient on industrial carbon emissions. Foreign trade openness, however, affects carbon emissions both positively and negatively. Foreign trade openness encourages carbon emission in sectors of the economy with lower carbon emission intensity. However, it also partially constrains it for sectors with high carbon emission intensity. The number of employees, technological innovation, GDP per capita, and economic activity intensity significantly influence carbon emissions in India's industrial sector. This study can extend further in other countries using the recent innovative methodologies.

Keywords: Carbon emissions; Foreign direct investment; Foreign trade openness; Threshold effect; Threshold regression.