Balancing progress and sustainability: Exploring the joint influences of oil consumption and economic growth on CO2 emissions: An empirical study of GCC countries

Abstract

The Gulf Cooperation Council (GCC) countries face a critical challenge in balancing economic growth (GDP) with environmental sustainability, given their heavy reliance on oil consumption (OC) and its significant contribution to carbon emissions (CO₂). While existing research predominantly examines the isolated impacts of energy consumption or GDP on CO₂, this study uniquely explores their combined effects, offering new insights into the intricate dynamics shaping environmental outcomes in resource-dependent economies. Utilizing advanced panel econometric methods, including Feasible Generalized Least Squares (FGLS), Panel Corrected Standard Errors (PCSE), and Panel Generalized Method of Moments (GMM) models, the analysis spans 1995 to 2020, ensuring robust and precise results, to uncover interdependencies that have remained unaddressed in previous studies. The results show that, in separate models, a 1 % increase in oil consumption is associated with a 0.552 % rise in CO₂ emissions, while a 1 % increase in GDP raises CO₂ emissions by 0.587 %. However, in the joint model, the interaction term between oil consumption and GDP remains positive and significant (0.044), indicating that their combined growth amplifies emissions. Notably, when accounting for this interaction, the coefficient of oil consumption alone becomes negative (-0.829), suggesting that, at certain GDP levels, increases in oil consumption may coincide with efficiency gains or cleaner energy integration, partially offsetting its emission effects. These findings emphasize the importance of decoupling economic growth from CO₂ by promoting sustainable energy practices and low-carbon technologies.

Keywords: CO(2) emissions; Economic growth; GCC countries; Oil consumption; Sustainable development.