Abstract
Renewable energy infrastructure is highly interrelated to environmental sustainability and the accomplishment of sustainable development goals. A significant portion of China's outward foreign direct investment (FDI) has been allocated to energy production and transmission across the Belt and Road Initiative (BRI) region. Therefore, we examine the influence of renewable energy infrastructure, China's outward FDI, and the host country's technical efficiency on ecological sustainability. This research uses the cross-sectional autoregressive distributive lag (CS-ARDL) model to address the issues of parameter and cross-sectional heterogeneity. The findings show that renewable energy infrastructure and technical efficiency significantly reduce carbon emissions in the long run. Likewise, FDI inflows and economic growth increase emissions in the BRI region due to higher energy consumption. Moreover, the direct effect of FDI on environmental quality is negative, while the indirect impact through moderation of FDI and renewable energy infrastructure leads to lower emissions. These results implied that the reallocation of inward FDI in energy infrastructure neutralizes the negative consequences, improves energy efficiency, and resultantly lower emissions. Therefore, it opens new policy implications that we focus more on investing FDI in the energy infrastructure sector.
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