Determinants of CO2 Emissions in Belt and Road Initiative Countries: Evidence from Panel models

Abstract

This study investigates the determinants of CO₂ emissions in 146 Belt and Road Initiative (BRI) countries over the period 1990–2023 using a comprehensive panel data framework. The analysis examines the effects of economic growth, population, fossil fuel energy consumption, renewable energy consumption, and foreign direct investment (FDI) on environmental degradation. To ensure robustness and address issues of unobserved heterogeneity, endogeneity, and dynamic persistence, the study employs pooled OLS, fixed effects, first-difference, and System GMM estimators. The empirical results show that population growth, fossil fuel energy consumption, and FDI consistently increase CO₂ emissions across all model specifications. In contrast, renewable energy consumption significantly reduces emissions, highlighting its role in promoting environmental sustainability. The relationship between GDP and CO₂ emissions is found to be non-linear, supporting the Environmental Kuznets Curve (EKC) hypothesis, where the impact of economic growth on emissions varies across development stages. The findings suggest that environmental degradation in BRI countries is primarily driven by demographic pressure, carbon-intensive energy use, and foreign investment patterns, while renewable energy adoption plays a mitigating role. Policy implications emphasize the need to accelerate the transition toward clean energy, improve environmental regulation of FDI, and promote sustainable development strategies in rapidly growing economies.