Will more multinational corporations inflow approach closer toward carbon neutrality? Novel propensity score matching‐difference‐in‐difference evidence across 35 developing countries

Abstract This paper mainly investigates the roles of multinational corporations (MNCs) inflow on carbon neutrality across 35 developing countries. First, we testify the role of MNCs inflow on carbon neutrality. Next, we compare the heterogenous effects of the Kyoto Protocol and the Paris Agreement on CO 2 emissions. Third, this study employs the propensity score matching (PSM) difference‐in‐difference (DID) with relatively higher internal validity to evaluate the policy shock impacts of the Kyoto Protocol and Paris Agreement. Furthermore, we also explore the impact of trade competitiveness on CO 2 emissions to verify the structure, technique, and scale effects of international trade. Finally, we also analyze how human capital impacts CO 2 emissions from the perspective of endogenous growth, departing from exogenous growth. The findings indicate that MNCs inflow has mixed effect on CO 2 emissions, due to pollution haven and halo effect. Kyoto Protocol increased CO 2 emissions, whereas Paris Agreement decreased CO 2 emissions. Human capital decreased CO 2 emissions according to the DID model, suggesting its crucial role in achieving carbon neutrality through endogenous growth mechanisms. Renewable energy consumption reduced CO 2 emissions, highlighting the importance of sustainable energy practices. Urbanization decreased more CO 2 emissions in the model of Paris Agreement over that of Kyoto Protocol. Trade competitiveness exhibits mixed effects on CO 2 emissions. It is better to facilitate the cleaner MNCs inflow across developing countries, aiming to decrease cross‐border pollution.