Energies, Vol. 14, Pages 5897: The Effect of Energy Consumption and Economic Growth on Environmental Sustainability in the GCC Countries: Does Financial Development Matter? (Energies)

Achieving environmental sustainability whilst minimizing the climate change effect has become a global endeavor. Thus, this study examined the effect of energy consumption (EC), economic growth (GDP), globalization (GLO), financial development (FD) on CO2 emissions in the GCC countries. The research utilized a dataset stretching from 1995 to 2018. In a bid to investigate these associations, this study applied cross-sectional dependence (CSD), slope heterogeneity, Pesaran unit root, Westerlund cointegration, cross-sectionally augmented autoregressive distributed lag (CS-ARDL), and Dumitrescu and Hurlin (D–H) causality approaches. The outcomes of the CSD and slope heterogeneity tests indicated that using the first-generation techniques will produce 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 CO2 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 the GCC economies. In addition, the results of the D–H causality test demonstrated a feedback causality association between CO2 and GDP and between financial development and CO2. Moreover, there is a one-way causality from energy use and globalization to CO2 emissions in the GCC economies. According to the findings, environmental pollution in the GCC countries is output-driven, which means that it is determined by the amount of energy generated and consumed.