The repercussions of foreign direct investment, renewable energy and health expenditure on environmental decay? An econometric analysis of B&RI countries

Abstract

To achieve the objectives of the study, we have analyzed the repercussions of income, foreign direct investment, health expenditure and renewable energy consumption on environmental pollution (CO₂) in a panel of Belt and Road Initiative (B&RI) countries over the time span 1995–2016. The study employed a second-generation unit root test, panel co-integration, two-step generalized method of moments (GMM), fully modified least squares (FMOLS), symmetric and asymmetric causalities for robust inference. The cointegration results established the long-run relationship between the variables. Empirical results indicated the effectiveness of renewable energy in combatting CO₂ emissions, the negative sign of FDI with CO₂ emissions negates the existence of the pollution haven hypothesis for the B&RI panel. Where income and health expenditure accelerates CO₂ emissions, which degrades the environment, these results in the case of individual countries differ in various stages. Varieties of symmetric and asymmetric causalities are also discussed in the study. The study concludes with long term policies, which are necessary for the sustained growth of B&RI countries.

Keywords:

• environmental pollution
• health expenditure
• renewable energy
• panel asymmetric causality
• B&RI countries

Disclosure statement

No potential conflict of interest was reported by the authors.

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Notes

1 PHH states that: polluting the environment in high-income countries has higher regulatory costs compared to low-income countries. In developing countries, less stringent environmental policies provide high-income countries with a comparative advantage in pollution intensive goods; thus the FDI inflows degrade the environment of the host countries (Sapkota and Bastola 2017).

2 B&RI, 65 countries and beyond (Chin and He 2016).

3 Cited literature is given in Appendix Table A1

4 Countries in East Asia and Pacific are Brunei, Cambodia, China, Indonesia, Mongolia, Myanmar, Philippines, Singapore, Thailand, Timor Leste and Vietnam; South Asian countries including Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Srilanka; Central Asian countries including Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan, Middle east and north African countries including Egypt, Iran, Iraq, Israel, Jordan, Kuwait, Lebanon, Saudi Arabia, United Arab Emirates and Yemen; European countries including Albania, Armenia, Azerbaijan, Belarus, Bosnia and Herzegovina, Bulgaria, Croatia, Czech Republic, Estonia, Georgia, Hungary, Latvia, Lithuania, Macedonia, Moldova, Montenegro, Poland, Romania, Russia, Serbia, Slovakia, Slovenia, Turkey and Ukraine.