Role of fiscal policy in energy efficiency and CO2 emission nexus: An investigation of belt and road region

Abstract

Belt and road initiative (BRI) contains the transport, construction, and energy‐related projects to push the wheel of economic development of BRI's participant at the cost of ecological consequences. These sectors are highly energy‐intensive and upsurge the CO2 emission. Energy efficiency and renewable energy are considered two essential solutions to control CO2 emissions. Energy efficiency is proficient in yielding energy and demand savings that can relocate the electricity generation from primary energy resources, that is why, nowadays, energy efficiency is considered as an energy resource worldwide. Fiscal policy is a vital policy tool regarding energy policies related to production, growth, distribution, and energy consumption. Therefore, this study investigates the relationship between energy efficiency and CO2 emission in light of the fiscal policy index for BRI countries. The results infer that energy efficiency and fiscal policy deteriorate the CO2 emission. On the other side, FDI and GDP will lead to an increase in CO2 emission. This study provides useful insights for policymakers on how to take preventive and remedial measures to reduce CO2 emissions in different sectors and demonstrated that technology in the energy sector could help to mitigate climate change through energy efficiency. Furthermore, future research can be carried out on how digitalization, energy efficiency monitoring processes, and management process can help to mitigate.