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The Effect of Energy Consumption and Economic Growth on Environmental Sustainability in the GCC Countries: Does Financial Development Matter?

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  • Hala Baydoun

    (Department of Accounting and Finance, Faculty of Economics and Administrative Sciences, Cyprus International University, North Cyprus, Mersin 10, Haspolat 99040, Turkey
    Department of Accounting Information Systems, School of Business, Lebanese International University, Beirut, Lebanon
    Department of Banking and Finance, School of Business, Lebanese International University, Beirut, Lebanon)

  • Mehmet Aga

    (Department of Accounting and Finance, Faculty of Economics and Administrative Sciences, Cyprus International University, North Cyprus, Mersin 10, Haspolat 99040, Turkey)

Abstract

Achieving environmental sustainability whilst minimizing the climate change effect has become a global endeavor. Hence, this study examined the effect of energy consumption, economic growth, financial development, and globalization on CO 2 emissions in the Gulf Cooperation Council (GCC) countries. The research utilized a dataset stretching from 1995 to 2018. In a bid to investigate these associations, the study applied cross-sectional dependence (CSD), slope heterogeneity (SH), Pesaran unit root, Westerlund cointegration, cross-sectionally augmented autoregressive distributed lag (CS-ARDL), and Dumitrescu and Hurlin (DH) causality approaches. The outcomes of the CSD and SH tests indicated that using the first-generation techniques produces misleading results. The panel unit root analysis unveiled that the series are I (1). Furthermore, the outcomes of the cointegration test revealed a long-run association between CO 2 emissions and the regressors, suggesting evidence of cointegration. The findings of the CS-ARDL showed that economic growth and energy consumption decrease environmental sustainability, while globalization improves it. The study also validated the environmental Kuznets curve (EKC) hypothesis for GCC economies. In addition, the results of the DH causality test demonstrated a feedback causality association between economic growth and CO 2 emissions and between financial development and CO 2 emissions. Moreover, there is a one-way causality from energy consumption and globalization to CO 2 emissions in GCC economies. According to the findings, environmental pollution in GCC countries is output-driven, which means that it is determined by the amount of energy generated and consumed.

Suggested Citation

  • Hala Baydoun & Mehmet Aga, 2021. "The Effect of Energy Consumption and Economic Growth on Environmental Sustainability in the GCC Countries: Does Financial Development Matter?," Energies, MDPI, vol. 14(18), pages 1-17, September.
    • Handle: RePEc:gam:jeners:v:14:y:2021:i:18:p:5897-:d:637666
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    2. Taslima Akther & Mushfiqur Rahman & Md. Mufidur Rahman, 2023. "Factors influencing commercial bank profitability in Bangladesh: a panel data approach," Future Business Journal, Springer, vol. 9(1), pages 1-20, December.
    3. Mohammed Musah, 2023. "Stock market development and environmental quality in EU member countries: a dynamic heterogeneous approach," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 25(10), pages 11153-11187, October.
    4. Khairul Aswadi & Abd. Jamal & Sofyan Syahnur & Muhammad Nasir, 2023. "Renewable and Non-renewable Energy Consumption in Indonesia: Does it Matter for Economic Growth?," International Journal of Energy Economics and Policy, Econjournals, vol. 13(2), pages 107-116, March.

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