Do financial development, FDI, and globalization intensify environmental degradation through the channel of energy consumption: evidence from belt and road countries.

This study explores the role of foreign direct investment (FDI), financial development (FD), and globalization (GLO) in environmental degradation (ED) through the channel of energy consumption (EC) for the selected panel of belt and road initiative (BRI) countries for 1990-2017. The study applies appropriate panel unit root tests, the Westerlund cointegration test, the dynamic seemingly unrelated regression (DSUR) long-run panel estimation approach, and the Dumitrescu-Hurlin panel causality test. Results of panel unit root test ascertain variables are interred either at a level or after first difference and long-run association documents by implementing conventional and error correction. Study findings with DSUR, in the long run, reveal that energy consumption and economic growth expose positive statistically significant association with environmental degradation, implying intensity in energy consumption and aggregate output level shall augment the present state of environmental degradation. While negative statistically significant effects reveal running from FDI, financial development, and globalization to environmental degradation, implying that energy efficiency technology, the scope of green financing through financial development, and cross country effects help the economy reduce environmental consequences with lesser carbon emission. Results of directional causality unveiled feedback hypothesis available in explaining the causality between environmental degradation and energy consumption [ED←➔EC] and FDI and environmental degradation [FDI←➔ED], moreover, unidirectional effects running from financial development, globalization, and economic growth to environmental degradation, i.e., [FD➔ED; GLO➔ED; Y➔ED]. The finding reveals the need to formulate energy policies that promote belt and road (BR) country energy efficiency.