Nexus between resource policy, renewable energy policy and export diversification: Asymmetric study of environment quality towards sustainable development

Abstract

This study examines the environmental performance of the United Arab Emirates (UAE) towards its sustainable development amidst its heavy endowment with natural resources and export diversification. The UAE is among the economies that depend on both export diversification and natural resources for their sustainable economic development. The two mentioned indices (export diversification and natural resources) have been proven to be among the drivers of carbon emissions. Notwithstanding, the UAE has a desert environment with nearly continuous sunlight capable of generating and boosting its renewable energy development. With this potential, it is crucial to create a green energy strategy since renewable energy sources are gaining popularity as alternatives to conventional energy sources. Natural resources and export diversification have garnered mixed reactions in their role towards environmental development. While some researchers report that they induce degradation, others suggest that they mitigate environmental damage. Also, empirically, studies have found renewables such as hydroelectricity, wind and geothermal energy capable of moderating and mitigating the negative impact of carbon emissions on the environment. In this study, data from 1990 to 2019 is analyzed using the nonlinear autoregressive distributed lag (NARDL) and dynamic ordinary least squares (DOLS) scientific methods. The variables of interest are natural resources, export diversification and renewable energy. Findings from NARDL show that export diversification, natural resources and economic growth negatively impact the environment in the UAE by inducing carbon emissions. Specifically, positive and negative shocks of export diversification, natural resources and economic growth to carbon emissions increase and decrease carbon emissions, while positive and negative shocks of renewable energy to carbon emissions decrease and increase carbon emissions. This indicates that the UAE has the potential to achieve its carbon neutrality target with a renewable energy policy.