Impact of foreign direct investments on climate change in developing economies under the belt and road initiative

Abstract

In an effort to promote global economic advancement, the Chinese government launched the ambitious Belt and Road Initiative (BRI). To that end, this research uses an annual frequency panel dataset from 2000 to 2020 to explore the energy, economic, and environmental dynamics of 42 BRI developing nations. Key conclusions from the econometric analysis showed that increased energy consumption, GDP growth, population growth rate, and FDI inflows have a negative impact on the environment by increasing PM2.5 and CO2 emissions of the chosen developing countries that are members of BRI. Nonetheless, it's noteworthy to note that by further reducing emission levels, utilizing renewable energy sources—which are generally cleaner than fossil fuels—and promoting the growth of the agriculture sector can greatly enhance environmental well-being. However, it is discovered that financial development is insufficient to account for the differences between the chosen countries' CO2 emission and fine dust PM2.5 data. Furthermore, the analysis demonstrates that increased energy use, foreign direct investment inflows, and agricultural growth stimulate CO2 emissions and fine dust PM2.5, which in turn lead to environmental pollution. Based on these results, a number of pertinent policies can be suggested to ensure the environmental sustainability of the Belt and Road Initiative