Towards ecological sustainability in GCC countries, the role of trade market diversification, economic growth, energy consumption, and foreign direct investment

The mounting interest in the environment has triggered scholars’ attention and effort to study the determinants of environmental degradation. Yet, a gap in the literature remains unexplored, environmental impacts of trade market diversification/concentration. This study is the first attempt to explore the effect of trade market diversification besides other variables such as economic growth, energy and foreign direct investment (FDI) on environment in Gulf Cooperation Council countries from 2000 to 2018. We used an innovative proxy which incorporates both the demand (two-dimensional ecological footprint) and supply (three-dimensional ecological footprint) aspects of the environment. The Im, Pesaran, and Shin (IPS) panel unit root test was implemented to check the stationarity of the variables, followed by investigating the long-run relationship through the Padroni cointegration test. Pooled mean group-autoregressive distributed lags (PMG-ARDL) estimator was used to estimate the long-run and short-run coefficients for the two models of ecological footprint. Our results showed that trade market concentration, FDI and energy consumption increase environmental degradation in the long run. The empirical results showed an increase in the GCC countries' income will simultaneously reduce environmental degradation and resource use, thus supporting the Environmental Kuznets Curve hypothesis. This empirical analysis provides new policy insights for GCC policymakers.