1. Introduction
China officially used the term the “One Belt and One Road initiative (BRI)” in 2015, containing 65 economies around the globe [
1,
2]. The National Development and Reform Commission, as well as the Ministries of Commerce, and Foreign Affairs of China publicly announced BRI visions to integrate industrial cooperation containing 65 countries from all over the world [
2]. 57 out of 65 of these countries had already signed the articles of agreement of the Asian Infrastructure Investment Bank for official banking service among the BRI region [
2]. BRI economies have a 30%, 38.5%, and 62.3% share of global gross domestic product (GDP), land area, and population respectively [
1,
2,
3]. An adequate level of energy is required to achieve the maximum level of output because energy is an essential feature for nurturing all development processes [
3,
4]. Rapid economic growth leads to an increase in energy use, which has a negative impact on the environment [
5]. In the modern world, industrial expansion creates additional demand for energy to fulfil capital intensive growth requirements and modern business operations [
3]. According to the World Bank, the world energy consumption increased by nearly 1.43% in 2015, while China was consuming energy at an increased rate of 1.04% [
6]. The patterns of energy consumption in BRI are compiled by using the World Development Indicators database [
6].
Figure 1 depicts a temporal increasing trend in average energy consumption of the BRI region. The regional energy consumption of BRI economies is presented in
Figure 2. It indicates that Europe, South Asia and Southeast Asian economies of BRI have less volatility in their regional energy consumption pattern. MENA economies follow a decreasing energy consumption pattern within the region. East Asia depicts a rapidly increasing energy consumption pattern due to the Chinese economy, as China is the second largest global economy.
On the other hand, BRI economies require energy to start mega-projects, which increases air pollutants and environmental degradation [
3,
7]. The average energy consumption is increasing environmental degradation in Europe. By contrast, energy consumption inequalities are decreasing environmental degradation in South Asian economies. Hence, environmental degradation is also an important matter of concern and is directly linked to energy consumption [
8]. Energy demands mostly depend on energy use, including renewable and non-renewable energy sources, and affect the environmental quality in major ways by increasing the risk of catastrophes and terrible damages (disasters) [
9,
10]. As for economic growth, a higher level of energy is required for present and upcoming material needs. An increase in energy demand is a direct cause of carbon dioxide (CO
2) emissions, which lead to environmental degradation and other environmental problems [
5,
9,
10]. CO
2 emissions, which account for 75% of greenhouse gases, are a major contributor to global warming and climate change worldwide [
11].
Effective financial policy is necessary concerning energy consumption to achieve sustainable development [
1,
12]. The financial sector of the world experienced a 5.61% growth rate in 2017 [
1,
6]. The role of financial markets is significant as many researchers argued that financial development encourages us to reduce energy consumption and investment in energy efficiency, mobilization and use of saving, source monitoring and to improve environmental quality [
13,
14]. Financial development includes providing foreign direct investment by increasing banking activities, stock markets domestic credits, cost loans and by promoting newly innovated technology and via the adoption of new financial development technologies which can increase energy efficiency [
15,
16]. Financial development allows consumers to get cheaper loans to buy consumer goods and creates energy demand due to the expansion of household consumption [
1,
17,
18]. Several researchers have given significant focus to investigating the relationship between energy consumption, environmental degradation and economic growth but financial development is still inadequately investigated in the case of BRI. Some of the studies have analyzed the relationship between energy and income growth [
15,
19,
20,
21,
22,
23], while the remaining studies have tested the EKC hypothesis by examining the relationship between environmental degradation and GDP [
1,
24,
25,
26]. Some studies also investigated energy consumption, carbon emissions, and economic growth linkages but did not incorporate the financial development indicators [
27,
28,
29].
Although BRI is getting attention around the globe, many of its participating countries are still considering its impacts on areas such as environmental degradation, income, and finance while seeking to catch up on the path of sustainable development. The BRI region contains 24% of global household consumption [
1,
2]. Transport infrastructure integration among BRI countries is the core objective of BRI to enable the free flow of economic benefits and to optimize resource allocation along the markets that are integrated [
2]. The China International Trade Institute also mentioned that industrial cooperation will be created among BRI economies [
2]. BRI also promotes financing and banking services through the Asian Infrastructure Investment Bank. Due to these circumstances, it will create an increase in energy consumption, and potential energy markets because of its dynamic role in the economy, thereby increasing economic growth and sustainable development [
4]. BRI economies make up 42.8% of world energy consumption [
2,
6]. Energy consumption enhances environmental degradation with respect to eight air pollution indicators [
7]. Sustaining rapidly growing energy consumption, and energy market is one of the prime hurdles to achieving BRI goals. Consequently, energy inequality can be an important instrument for predicting energy consumption patterns. Therefore, there is a dire need to investigate the energy inequality and environmental degradation-financial development nexus within BRI and its regions. The contribution of the study is three-fold. Firstly, the aspiration of the study is to reveal the regional disparities of energy consumption. It also spotlights the impact of energy inequalities on environmental degradation along with financial development. Energy inequalities with respect to the population of BRI and its region, are computed through entropy (Theil’s index). Secondly, it is tested whether regional, intra-regional or total energy inequality affect environmental degradation. Lastly, the study also explores the impact of financial development on environmental degradation.
The empirical findings will be helpful for understanding energy consumption and developing a green economy. The temporal quantification of the energy inequalities with respect to population differ in BRI regions. Understanding these differences will contribute to energy and environmental policy formulations. Therefore, regional energy inequality is an essential instrument to understand energy consumption within and across the BRI region. Furthermore, energy consumption is directly linked to economic development and the environment. Regional energy inequality and financial development also enlighten the regional response of environmental degradation to devise better eco-friendly and energy policies.
4. Results and Discussion
From the energy inequality index, it inferred that BRI has a temporal increasing trend in the average consumption of energy inequality. In the regional context, Pareto analysis figures out that MENA, and BRI are ranked 1st and 2nd with respective to energy disparity range among the regions respectively. Energy consumption inequality is rapidly increasing within East Asia over time due to Chinese economic expansion. Meanwhile, East Asia and South Asia demonstrate a temporal increasing pattern in between the regions and total energy consumption inequality respectively, since these regions have a larger population size due to countries like Bangladesh, China, India, and Pakistan. In contrast, MENA, and Central Asia show a declining trend in between the regions and total energy consumption inequality respectively.
The average energy consumption inequality (EI) has a substantial major influence on environmental degradation in case of BRI, and its 6 regions. The EI of East and Central Asian countries have a greater up-surging effect on environmental degradation as compared to other regions. However, energy consumption inequality between the regions (BEI) also has a statistically positive impact on environmental degradation in the case of BRI, and its regions except for MENA and South Asia. In European economies, only EI is increasing environmental degradation. The European Environment Agency (EEA) has indicated that air pollutants emissions have declined dramatically in recent decades due to environmental regulations.
The total energy consumption inequality (TEI) is also significantly increasing the environmental degradation in BRI, East Asia, Central Asia, MENA, Southeast Asia respectively but is not doing so for Europe and South Asia. This infers that energy inequalities accrue environmental degradation as shown in the study of reference [
7], which also showed that energy consumption enhances air pollution indicators. Non-renewable and total energy consumption is increasing CO
2 emissions [
43,
44].
In contrast, energy consumption inequalities have a deteriorating effect on environmental degradation in South Asian economies since these economies have successfully implemented the “Environmental Acts”, and strategies for sustainable development [
45]. Due to the Environmental Acts, South Asia is implanting modern and eco-friendly technologies for production, which ultimately improve the state of the environment [
15,
16,
45,
46,
47]. South Asian countries mostly rely on primary industries and agricultural export, which are smaller global warming determinants. An increment in value added for agriculture leads to a decline in CO
2 emissions [
48]. As another possibility, South Asian countries are utilizing hydro and nuclear projects to produce energy that produces less CO
2 emissions [
47,
49].
In the presence of EI, financial development (FinDev) has a statistically positive impact on environmental degradation in case of BRI, Europe, and Asian regions except for Central Asia. In MENA, and Central Asia, financial development does not affect environmental degradation along EI. In the presence of BEI, environmental degradation is enhanced by financial development of BRI, East Asia, Europe, South Asia, and Southeast Asia respectively. In the presence of TEI, financial development is significantly increasing environmental degradation in BRI and in its regions except for Central Asia and South Asia. The first interpretation for financial development having a positive impact on environmental degradation is the easy access of capital, and investment for production from the financial and banking sectors, respectively [
1,
2]. The second reason is that rapid investment creates demand for additional energy consumption through higher volumes of vehicles, machinery, refrigerators, and air conditioners [
1,
10].
5. Conclusions and Policy Implications
The BRI region is experiencing rapid growth in population and energy consumption as the BRI region contains 24%, 42.8%, and 62.3% of global household consumption, energy consumption, and population respectively. The production methods related to energy are inflating the energy inequalities in the BRI region. Thus, the present study unveils to what extent the population is affecting the dynamics in energy inequalities in BRI, and within BRI regions respectively to provide insightful information for policy development. It also highlights the inter, and intra energy inequality among BRI and its regions respectively.
The energy consumption inequalities are computed by using the state of the art “Theil’s entropy” method. Central Asian and MENA economies are following a declining trend in energy inequalities among themselves respectively. However, East Asia has experienced higher energy inequality within the region over time. South Asia has the lowest energy inequality among the BRI regions. Within regions, the model found that Central Asia has the lowest energy inequality, and East Asia has the highest among the BRI regions respectively. South Asian and MENA show temporal increases, and a declining trend in energy consumption disparity between the BRI regions respectively. Furthermore, the total energy disparity traces the temporal divergence across the BRI regions due to the higher energy consumption level of China.
The GLS based on bootstrapping is applied to quantify the impact of energy consumption inequalities on environmental degradation along financial development. The energy inequalities have a statistically positive impact on environmental degradation in BRI, East Asia, Central Asia, MENA, and Southeast Asia respectively. In MENA, total energy consumption inequality enhances the environmental degradation at a higher rate due to oil exporting countries within the region. In contrast, energy consumption inequalities are reducing environmental degradation in the case of the South Asian economies. Moreover, energy consumption inequalities have an insignificant impact on European environmental degradation. Financial development also has a significantly positive impact on environmental degradation in BRI, and its regions except for Central Asia, and MENA in average, between the regions, and total energy consumption inequality models respectively.
Based on empirical findings, the study proposes three managerial policy implications. Firstly, the BRI, and its regions like South Asia, can actively participate in adopting eco-friendly and modern technologies, which can be helpful to enhance energy efficiency and bring a downturn in environmental degradation. Secondly, the BRI, and its region having a significantly positive impact on energy consumption inequalities regarding environmental degradation, could be active in replacing non-renewable energy consumption with renewable energy consumption, which emits less CO2 emissions in the environment. Lastly, the quantification of energy inequalities is applicable to maintain balance in regional energy consumption inequality within BRI and its regions. These policies can target the higher energy consumption inequalities in BRI regions to balance additional energy demand. Thus, the current paper suggests strategically-guiding principles concerning energy consumption, environmental combat, and sustainable development.