Nexus between renewable-disaggregated non-renewable energy consumption and economic growth in GCC countries: a Cobb-Douglas production function analysis

The Gulf Cooperation Council (GCC) countries face the challenge of balancing their reliance on non-renewable energy with the need for sustainable economic growth. This study investigates the disaggregated impacts of renewable and non-renewable energy sources (coal, oil, natural gas) on GDP in GCC nations from 1995 to 2020, addressing the gap in understanding how different energy types contribute to growth in this region. Using a Cobb-Douglas production function and advanced panel econometric methods, including Feasible Generalized Least Squares (FGLS) and Panel-Corrected Standard Errors (PCSE) models, we account for cross-sectional dependence and heterogeneity. Our results show that non-renewable energy, particularly natural gas, drives long-term GDP growth, but with diminishing returns, while renewable energy shows a significant positive correlation with GDP, indicating its potential for supporting sustainable growth. Causality tests confirm that oil promotes growth, coal and natural gas support conservation, and renewables have a neutral impact. These findings challenge the traditional energy dependency of the GCC and emphasize the need for energy diversification. We recommend increasing investments in renewable energy, improving energy efficiency, and aligning human capital development with sustainability goals. This study provides a region-specific framework for policymakers navigating the energy transition in hydrocarbon-dependent economies.