Does the Belt and Road Initiative affect the energy intensity of countries along the route? An analysis of the direct and indirect effects

Abstract

We empirically evaluate the effect of China’s Belt and Road Initiative (BRI) on the energy intensity of countries along the route. Furthermore, we decompose this overall effect into direct effects via connectivity and indirect effects through development. We apply a relatively new synthetic control method based on interactive fixed effects to identify the causal effects of the BRI. Our main results include: (1) the overall effect of the BRI reduces the energy intensity of countries along the route by 0.0152 toes per thousand dollars, of which the direct effect is 0.0125 (82%); (2) the indirect effect in the current status is limited, mainly through the contradictory effects of economic growth and industrial structural change; and (3) countries along the route with a lower level of development, higher levels of energy technology, more abundant energy endowments, and less stringent carbon regulations experience a greater reduction in energy intensity after the BRI.