Trade Engagement, Economic Growth, and Institutional Quality on Environmental Degradation for ASEAN-5 Under the Green Belt-Road Initiative

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The study utilizes empirical analysis to examine how trade engagement with China and factors related to economic growth affect environmental quality for ASEAN-5 countries and establish both short- and long-run relationships with causality directions from 1996 until 2020. The empirical evidence suggests that the environmental degradation in the region has been exacerbated by the integration of economic growth and financial development over time. The negative relationship suggests that engaging in trade with China, FDI, and improving institutional quality levels can improve environmental cleanliness. The study validated the EKC hypothesis during ASEAN-5’s economic growth, but it did not support the Pollution Haven Hypothesis (PHH). The direct impact of carbon emissions is on trade engagement, foreign direct investment, and institutional quality, but it has an indirect impact on GDP and financial development. This study has greatly contributed to the creation of valuable environmental policies in the future to safeguard sustainable environmental concerns in the Green Belt-Road Initiative (BRI).