Carbon footprints and development: Unraveling the puzzle in belt and road economies

The global push for sustainable development has brought the carbon footprint of economic growth into sharp focus. As the Belt and Road Initiative (BRI) expands, understanding the complex interplay between development and carbon emissions in its participating economies is paramount. Thus, this study explores the relationship between the human development index, foreign direct investment, biomass energy consumption, urbanization, trade openness, financial development, gross capital formation, and carbon footprint in 114 BRI economies. Using panel data from 1990 to 2023, the study applied three robust econometric techniques, including Driscoll-Kraay Standard Error, Feasible Generalized Least Squares, and Dumitrescu and Hurlin Granger causality approach. Empirical findings validated the inverted U-shaped Environmental Kuznets Curve, as initially human development increases the carbon footprint, but after a threshold level, it decreases the carbon footprint in the sample countries. However, the negative coefficient on the linear and squared terms is an important finding, suggesting that foreign investment is not associated with a pollution haven hypothesis. Further, results revealed that biomass energy consumption, urbanization, gross capital formation, and financial development positively contribute to carbon footprint under specified models. However, trade openness decreases the carbon footprint. The study concludes that BRI economies should not only foster human and capital development, but also strategically leverage foreign direct investment to promote a sustainable transition.