What initiates carbon dioxide emissions along the Belt and Road Initiative? An insight from a dynamic heterogeneous panel data analysis based on incarnated carbon panel

The Belt and Road Initiative (BRI), as an economic cooperation, provides interaction between the relevant countries and China. This cooperation between the BRI economies is basically aimed at increasing economic development. However, economic cooperation affects humanity in many ways, such as job creation, economic growth, environmental changes, and changes in the consumption of energy. Among these changes, considerable attention has been drawn to CO2 emissions arising from economic growth and its related environmental changes. This attention is vital in order to achieve the UN sustainable development goal 13: urgent action to combat climate change and regulations for the emissions of CO2. Thus, this study explores the determinants of CO2 emissions along the BRI, taking into consideration if countries are net importers or exporters of incarnated carbon dioxide. The econometrics applied indicated the presence of slope heterogeneity and cross-sectional dependencies across the various panels. Applying the Westerlund bootstrap co-integration unveiled the presence of a long-run equilibrium association among the variables. The results from the dynamic common correlated estimator (DCCE) revealed that the contribution weight (order of importance) to CO2 emissions varies across panel clusters. The causality results unveiled a bidirectional causation in all panels between economic growth and CO2 emissions. Trade openness and CO2 emissions have a bidirectional effect in the belt and road and net exporters of incarnated carbon dioxide panels. Based on the results obtained, the policy implications suggested that (a) energy transition from fossil fuel usage to renewables will play a crucial role in mitigating economic growth’s environmental pressures and (b) governments along the BRI could also implement subsidy swaps involving the transfer of government aid from oil and coal gas to renewable sources, including wind and solar.