TAILIEUCHUNG - Pollution haven hypothesis and Environmental impacts of foreign direct investment: The Case of Industrial Emission of Sulfur Dioxide (SO2) in Chinese provinces

Lead is the most pervasive pollutant found in the Blacksmith Institute’s database and is a well-documented health hazard. The Blacksmith Institute has identified over 500 sites polluted by lead, putting an estimated 16 million people at risk. Based on the Blacksmith Institute’s investigations, the top sources contributing to lead pollution, by population, are lead smelting, mining and ore processing, industrial estates and lead-acid battery recycling and manufacturing. Lead pollution is also found in polluted sites around product manufacturing sites, e-waste recycling and chemical manufacturing sites. In the ., lead is most predominantly used for manufacturing lead-acid batteries. 13 But around the. | CERDI Etudes et Documents Ec CENTRE d etudes ET DE RECHERCHES SUR LE DÉVELOPPEMENT INTERNATIONAL Document de travail de la série Etudes et Documents Ec halshs-00564699 version 1 - 9 Feb 2011 Pollution haven hypothesis and Environmental impacts of foreign direct investment The Case of Industrial Emission of Sulfur Dioxide SO2 in Chinese provinces Jie HE CERDI Université d Auvergne 65 Boulevard de F. Mitterrand 63000 Clermont-Ferrand France Tel Fax Email .fr Feb 9th 2005 38 p. 1 CERDI Etudes et Documents Ec halshs-00564699 version 1 - 9 Feb 2011 Abstract Recognizing the complex inter-correlation between FDI emission and the three economic determinants of emission we constructed a simultaneous model to study the FDI-emission nexus in China by exploring both the dynamic recursive FDI entry decision and the linkage from FDI entry to final emission results under the intermediation of the scale composition and technique effects. The model is then estimated on the panel data of China s 29 provinces industrial SO2 emission. Result shows that exerting through different channels the total impact of FDI on industrial SO2 emission is very small. With 1 increase in FDI capital stock industrial SO2 emission will increase by in which the emission increase caused by impact of FDI on economic growth and composition transformation cancels out the emission reduction result due to FDI s role in reinforcement of environmental regulation. By introducing to the simultaneous system the recursive dynamism that supposes FDI entry decision to depend on last period s economic growth and environmental regulation stringency our model also provides convincing supportive evidences for Pollution haven hypothesis. Although FDI enterprises in China generally produce with higher pollution efficiency the rise in environmental regulation stringency still has modest deterrent effect on FDI capital inflow. Furthermore

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