Energy consumption, pollution haven hypothesis, and Environmental Kuznets Curve: Examining the environment–economy link in belt and road initiative countries

Abstract

The relationship between economic growth and the environment has been a topic of steady research attention. In this paper, the link between the environment and the economy in 89 Belt and Road Initiative (BRI) countries from 1995 to 2017 is examined, and both the Environmental Kuznets Curve (EKC) hypothesis and the pollution haven hypothesis (PHH) are tested. The results showed that the BRI displayed an inverse U-shaped relationship between environmental degradation and economic growth. By introducing foreign direct investment (FDI) in the context of the EKC model, it was found that FDI generally had a positive impact on environmental quality. However, the region-specific results suggested divergent patterns related to the environment and economic growth. It was found that the EKC was valid, and FDI showed a negative relationship with environmental degradation in the European area. However, no evidence of the EKC was found in the Middle East and North Africa, nor in Sub-Sahara Africa. Mixed results for the EKC and the PHH were found in Asia, the Pacific, and the Latin America panel. This suggested that the BRI countries need to reduce their dependence on fossil fuels and adopt more region-specific green policies for local sustainable development.