The effects of FDI and energy consumption on environmental pollution in predominantly resource-based economies of the GCC

Abstract

This study empirically examine the effects of foreign direct investment inflows and energy consumption on environmental pollution in the GCC from 1990 to 2014. The study employed the Pooled Mean Group (PMG) methodology. The findings of the study discovered FDI inflows to have negative impact on the environment while energy consumption was detected to have positive impact and both were found to be statistically significant in explaining the extent of carbon emissions in the region. Additionally, higher disposable income, domestic investment, and FDI were detected to have significant influence on energy use in the GCC. The study also discovered how higher disposable income and FDI helps in improving environmental quality in the GCC. While energy use through domestic investment reduces it. Furthermore, relative income negatively impacts the environment through FDI. Our results did not support the idea that the selected GCC countries are pollution haven. The study conclude that for these countries to enjoy perpetual benefits of pollution free states, there is the need to prioritize full scale production of efficient, sufficient and sustainable green energy and ensure optimum energy mix management. This will reduce the level of CO2 emission as a result of heavy energy consumption of these countries as discovered by the study.