Exploring the carbon footprints of economic growth, foreign investment, energy dependency and financial development: does EKC work in GCC region?

Abstract

PurposeThe present study aims to investigate the validity of the Environmental Kuznets Curve (EKC) by exploring the role of various economic factors including economic development, foreign investment, human capital, energy dependency, financial development (FD), etc., in CO2 emissions.Design/methodology/approachFor empirical analysis, the samples for the years 2001–2019 of six GCC region countries that apply the fully modified ordinary least squares model were utilized.FindingsThe statistical results show that economic development, foreign investment, energy dependency, human capital and oil rents have a direct impact on CO2 emissions, whereas trade liberalization and FD have an indirect impact. Nonetheless, the empirical analysis rejects the EKC hypothesis in the set of GCC region countries. The empirical findings in connection to the basic premises of the EKC model are found to be statistically constant for the linear relationship. The GCC region is rigid regarding CO2 emission because of its reliance on main energy sources like oil and gas.Research limitations/implicationsThe current analysis directs the policy recommendations about environmental sustainability to environmental economists and other policymakers. The development of such policy instruments as the adoption of contemporary technology and reduced reliance on fossil fuels is advised to mitigate the negative externalities of multiple economic factors. Similarly, future studies should focus on trade liberalization and FD, both of which have a declining trend in CO2 emissions.Originality/valueThe present study is innovative by means of testing the EKC model and exploring how other factors related to CO2 emissions in the GCC region.