Urbanization and CO2 emissions in Belt and Road Initiative economies: analyzing the mitigating effect of human capital in Asian countries

Abstract

Balanced and sustainable development is one of the Belt and Road Initiative (BRI) objectives. Therefore, considering the role of urbanization and human capital as critical elements for sustainable development, we analyzed the moderating effect of human capital on the relationship between urbanization and CO₂ emissions in Asian member countries of the Belt and Road Initiative. In doing so, we used the STIRPAT framework and the environmental Kuznets curve (EKC) hypothesis. We also employed the pooled OLS estimator with the Driscoll-Kraay's robust standard errors, the feasible generalized least squares (FGLS), and the two-stage least square (2SLS) estimators in the case of 30 BRI countries for the period 1980-2019. The relationship between urbanization, human capital, and carbon dioxide emissions were examined first by showing a positive correlation between urbanization and carbon dioxide emissions. Secondly, we showed that human capital mitigated the positive effect of urbanization on CO₂ emissions. Next, we demonstrated that human capital had an inverted U-shaped effect on CO₂ emissions. Specifically, a 1% increase in urbanization rose CO₂ emissions by 0.756%, 0.943%, and 0.592% following the Driscoll-Kraay's OLS, the FGLS, and the 2SLS estimators, respectively. A 1% increase in the combination of human capital and urbanization reduced CO₂ by 0.751%, 0.834%, and 0.682%, respectively. Finally, a 1% increase in the square of human capital decreased CO₂ emissions by 1.061%, 1.045%, and 0.878%, respectively. Accordingly, we provide policy implications on the conditional influence of human capital in the urbanization-CO₂ emission nexus for sustainable development in these countries.

Keywords: Asian countries; BRI; CO2 emissions; Human capital; STIRPAT; Urbanization.