Spatial analysis of financial development's effect on the ecological footprint of belt and road initiative countries: Mitigation options through renewable energy consumption and institutional quality

Abstract

Today's world is characterized by competition to fulfill high and sustainable development via increased economic activities associated with production and consumption, which then lead to higher demand and pressure on the natural resources and environment. The Belt and Road initiative (BRI) countries are not an exception. Accordingly, this study assessed in depth the spatial direct and spillover influence of financial development (FD), renewable energy consumption (RECO), and institutional quality (IQ) on the ecological footprint consumption (EFC), carbon footprint consumption (CFC), and non-carbon footprint consumption (NCFC) of 57 BRI countries based on panel data from 1992 to 2018. We also linked the findings to the implementation level of the relevant Sustainable Development Goals (SDGs). To do so, this study employed the Stochastic Impacts by Regression on Population, Affluence, and Technology (STIRPAT) model and econometric spatial analysis methodology and conducted a test through a heatmap with labels. The empirical outcomes noted spatial autocorrelation (SAR) for the EFC, CFC, and NCFC between the BRI countries. In addition, FD has a positive direct and spillover influence on EFC, CFC, and NCFC, but the exact opposite for RECO and IQ. In terms of direct influence, gross domestic product (GDP), urbanization (URBP), and foreign direct investment (FDI) raise the EFC, CFC, and NCFC levels, whereas globalization (GLI) and total natural-resources rent (TNR) reduce them. Regarding the spillover effect, GDP enhances EFC, CFC, and NCFC; FDI escalates EFC and CFC, whereas GLI and TNR lower ECF and NCFC, respectively. Furthermore, the test using a heatmap with labels on the implementation level of SDGs supported the empirical findings on BRI countries. Overall, the empirical results are robust, thus providing policymakers new insights to ameliorate the environmental performance of BRI countries.