Examining the role of China's outward direct investment in realizing carbon neutrality: empirical evidence from Belt and Road countries

Purpose Known as the major capital providers in Belt and Road countries and the largest carbon emitter in the world, what role China's outward direct investment (ODI) plays in carbon neutralization has become a matter of concern. This study aims to measure the impact of China's ODI on the carbon emissions of Belt and Road countries. Design/methodology/approach Based on an econometric model and an inter-regional input-output model, a new model measuring the carbon emission effects of ODI is developed. Findings The empirical results show that (1) in general, China's ODI generates an emission-reduction effect in Belt and Road countries; (2) The relationship between the emission-reduction effect and income level of host countries shows an approximate inverted U-shaped trend; and (3) China's ODI generates stronger emission-reduction effects on capital-intensive industries. Originality/value This study quantitatively measures the scale of carbon emission-increase and reduction effect, which is relatively lacking in previous studies. This study explores the heterogeneity from the perspectives of regions, countries and industries. The authors have compiled an inter-regional input-output table for the Belt and Road countries for 2014 to provide a broad basis for the study of related issues.