Analysis on the nexus amid CO2 emissions, energy intensity, economic growth, and foreign direct investment in Belt and Road economies: does the level of income matter?

This study determines the relationship between economic growth, foreign direct investment, energy intensity, and carbon dioxide emissions along the Belt and Road initiative considering their income classification. The study employs data from 1995 to 2015, the panel unit root test, Westerlund cointegration test, augmented mean group estimation, and the Dumitrescu-Hurlin Granger causality test. The empirical results indicate that (1) the data from all income group had cross-sectional association; (2) the variables are integrated of order 1 after first difference; (3) The variables under discussion were cointegrated; (4) at 1% increase in energy consumption, carbon dioxide emissions increased by 0.8606%, 0.9082%, 0.91815%, and 0.8043% in high-, upper-middle-, lower-middle-, and low-income countries, respectively; (5) a bidirectional causal relationship was found between foreign direct investment and carbon dioxide across all income groups. Energy intensity has a bidirectional association with carbon dioxide in low-, upper-middle-, and high-income countries but one-way association in lower-middle-income countries. These recent methodologies take cross-sectional dependence into account in their estimation and findings show that the causal affiliations together with long-run estimated effects amid employed variables are influenced by the different income levels of Belt and Road countries in a tender to reduce carbon dioxide emissions. The empirical results point to some important policy implications.