Does FDI impede environmental quality in low-, middle-, and high-income BRI countries? Untapping the role of renewable energy SDG-7 toward SDG-13

Regarding policy, the Belt & Road Initiative (BRI) countries prioritize achieving a sustainable environment. Renewable energy is the top priority objective of many countries in enhancing their environmental sustainability. Considering this, we empirically evaluate the impact of renewable energy, total FDI, and Chinese FDI on CO2 in panels of 130 BRI countries divided - by various income groups. The long-term results obtained through the Driscoll-Kraay and FMOLS estimations validate the pollution halo hypothesis for high-income and upper-middle-income countries. In contrast, evidence from low- and middle-income country panels aligns with the pollution-haven hypothesis. The empirical analysis also reveals that rising levels of urbanization and economic prosperity contribute to increased CO2 emissions. Moreover, the findings highlight that renewable energy consumption plays a crucial role in mitigating CO2 emissions, as it exhibits a statistically significant negative effect. For sustained growth in BRI, it is recommended that policymakers implement effective pollution control measures and increase investment in renewable energy sources to mitigate pollution.