Sustainable Development and Carbon Dioxide Emissions in the GCC Region: Evidence from a Panel ARDL-PMG Analysis

This study examines the long- and short-run effects of sustainable development, economic growth, energy consumption, urbanization, investment and trade openness on Carbon Dioxide Emissions (CO2) in the GCC countries utilizing the PMG-ARDL approach by including the data spanning from 2000 to 2022. In the short -run, the sustainable development index demonstrates a positive and substantial impact while it exhibits adverse long-run impact on CO2 emission. The study also indicates a U-shaped correlation between economic growth and emissions, contrasting with the conventional Environmental Kuznets Curve (EKC) where economic growth at lower income levels often leads to a reduction in emissions; however, income increases beyond around USD 29,942 per capita correlate with higher emissions. Besides, energy use is identified as the primary factor influencing emissions, reflecting global patterns that indicate greater energy usage, particularly from fossil fuels directly boosts emissions. Moreover, the urbanization intensifies this problem, resulting in higher energy demand and greater emissions. Additionally, the study finds that gross capital formation and investments in infrastructure contribute to emissions in the short run, though these effects diminish over time. Our results are robust as it similar to the outcomes obtained from dynamic panel-data System GMM. The GCC policymakers must utilize the sustainable development framework to legally mandate national planning towards low-carbon paths while balancing for short-term transition costs with significant long-run emission reductions. This necessitates the implementation of market-oriented carbon pricing to address the post-threshold U-shaped emissions rebound, the systematic elimination of fossil fuel subsidies to promote renewable energy adoption, and the enforcement of sustainable development regulations to mitigate urbanization pressures.