The economic and carbon impact of China's outward foreign direct investment in the power sector

This chapter examines the economic and environmental effects of outward foreign direct investment of China’s coal-fired power sector to Indonesia, Vietnam, India, and Turkestan using China’s Global Power Database constructed by Boston University. We determine how China’s carbon relocation policy has affected the international economy and the environment. To quantitatively evaluate these effects, we use the Energy–Environmental Version of the Global Trade Analysis Project (GTAP-E) model, which is a computable general equilibrium model.

This chapter demonstrates that overseas capital movements from the Chinese power sector generally increase global carbon dioxide (CO₂) emissions. If China makes direct investments to reduce domestic emissions (i.e., for domestic optimization), such a decision could ultimately prove counterproductive from a global perspective. This result indicates that international society must be cautious about the countries and regions chosen for allocations of investment capital.