The role of infrastructure investment, tourism development, and technological innovation in decarbonizing the Belt and Road Initiative economies

Abstract

The study investigates the relationship among Chinese outward foreign direct investment (OFDI), tourism development, technological innovation, and CO₂ emissions across 56 Belt and Road Initiative countries from 2006 to 2023. To account for cross-sectional dependence and slope heterogeneity, the study has applied the Cross-Sectional Augmented Autoregressive Distributed Lag and Common Correlated Effects Mean Group techniques. The results reveal that Chinese OFDI and technological innovation significantly reduce long-run CO₂ emissions, with elasticities of −0.27% and −0.23%, respectively, whereas tourism development has a positive and significant effect on CO2 emissions (elasticity: 0.11%). The results further reveal substantial regional heterogeneity. Chinese OFDI reduces CO₂ emissions in South Asia, East Asia, and the MENA region, while increasing CO₂ emissions in Central Asia, Central & Eastern Europe, Western Europe, and the Commonwealth of Independent States (CIS). Moreover, the interaction between OFDI and tourism development intensifies CO₂ emissions, highlighting a critical policy paradox: infrastructure investment promotes tourism development while simultaneously degrading the environmental resources that are important for long-run tourism competitiveness. The analysis also validates the Environmental Kuznets Curve (EKC) hypothesis, supporting an inverted U-shaped relationship between economic growth and environmental degradation.