FDI, economic growth, and carbon emissions of the Chinese steel industry: new evidence from a 3SLS model

Determine the main factors affecting carbon emissions of the Chinese steel industry is indispensable commitments to achieve the sustainable development of China. Hereby, based on the Stochastic Impacts by Regression on Population, Affluence and Technology (STIPRAT) model, this paper combines the economic growth function, carbon emission production function, and the FDI function of the Chinese steel industry, and uses the three-stage least square equation model (3SLS) to analyze the relationship between China’s economic growth, carbon emissions in the steel industry, and FDI (foreign direct investment) inflows. The results document a complete two-way causal relationship of three variables in the whole country and the Western region, while the relationship in the Eastern region and the Central region is not complete. Moreover, there are no bidirectional causal relationship between carbon emissions and FDI in the Eastern region, while only bidirectional causality between carbon emissions and FDI in the Central region. These findings are of great significance for the Chinese steel industry to formulate effective emission reduction policies.