Economic Development and Environmental Sustainability in the GCC Countries: New Insights Based on the Economic Complexity Index
Based on:
Journal Article (2023)
Analysing the impacts of economic complexity, income, globalization, and non-renewable energy use on environmental sustainability in Gulf Cooperation Council (GCC) countries, with the Environmental Kuznets Curve (EKC) hypothesis.
Brief by:
Research collaborators:
This study investigates the link between economic development and environmental sustainability within the GCC countries of Saudi Arabia, Qatar, Oman, Kuwait, Bahrain, and the UAE, regions heavily reliant on non-renewable resources. Historically, economic growth in the GCC has relied on crude oil production, leading to substantial ecological degradation and the lowest global biocapacity ratios. GCC countries’ combined emissions rank among the top 25 global emitters, and their per capita ecological footprints exceed sustainable levels. However, each GCC state shows distinct economic and environmental profiles, with some (e.g., Bahrain and the UAE) experiencing faster economic complexity growth than others. By examining the Environmental Kuznets Curve (EKC) hypothesis using the Economic Complexity Index (ECoI), this study aims to expand on prior environmental research by including multiple environmental impact metrics-carbon dioxide (CO₂) emissions and ecological footprint per capita (EFpc). This study also explores whether the complex economic structures in GCC countries might eventually lead to sustainable resource management.
Key findings
Economic complexity supports an inverted U-shaped relationship between ECoI and environmental degradation in GCC countries.
Evidence
Results confirm a statistically significant inverted U-shaped association between ECoI and environmental degradation, where the ECoI initially increases environmental pressure (for both CO₂ and EFpc) before leading to environmental improvements. However, this effect varies by environmental indicator and country. The inverted U relationship is observed in all GCC countries for CO₂ emissions and in only four for EFpc (Bahrain, Kuwait, Saudi Arabia, and UAE).
What it means
Increased economic complexity may reduce environmental degradation once GCC economies surpass specific complexity levels, aligning with the EKC hypothesis.
Non-renewable energy consumption (NREW) is positively associated with environmental degradation based on EFpc, but unexpectedly reduces CO₂ emissions in the GCC.
Evidence
NREW consumption increases EFpc by 7.6%–9.3% for every 1% increase but shows a statistically significant negative association with CO₂ emissions, reducing them by 8.2%–13.9% for every 1% increase. This reduction may reflect GCC governments' initiatives, including renewable energy investments and demand-side energy efficiency programs.
What it means
NREW consumption, despite having mixed effects, highlights the need for GCC countries to transition to cleaner energy while improving energy efficiency.
Globalization exacerbates environmental degradation across the GCC.
Evidence
For every 1% increase in globalization (measured by the KOF Index), EFpc increases by 0.04%, and CO₂ emissions rise by 0.07%–0.08%. These effects are statistically significant across GCC countries, where economic globalization contributes to resource-intensive industries.
What it means
Globalization, without stringent environmental regulations, risks worsening environmental conditions by intensifying production demands.
Economic growth impacts EFpc but shows negligible influence on CO₂ emissions.
Evidence
Per capita income growth positively correlates with increases in EFpc, underscoring a significant relationship between income levels and environmental degradation. However, no notable effect of GDP per capita on CO₂ emissions is observed, indicating that economic growth alone may not reduce carbon emissions in the GCC.
What it means
This suggests a complex role of income in environmental sustainability and the importance of green policies beyond economic growth.
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Economic Development and Environmental Sustainability in the GCC Countries: New Insights Based on the Economic Complexity Index
Cite this brief: ElMassah, Suzanna. 'Economic Development and Environmental Sustainability in the GCC Countries: New Insights Based on the Economic Complexity Index'. Acume. https://www.acume.org/r/economic-development-and-environmental-sustainability-in-the-gcc-countries-new-insights-based-on-the-economic-complexity-index/
Brief created by: Professor Suzanna ElMassah | Year brief made: 2024
Original research:
- Hassanein, E., & ElMassah, S., ‘Economic Development and Environmental Sustainability in the GCC Countries: New Insights Based on the Economic Complexity Index’ (pp. 1–24) https://doi.org/10.3390/su15107987. – https://zuscholars.zu.ac.ae/cgi/viewcontent.cgi?article=6902&context=works
Research brief:
Analysing the impacts of economic complexity, income, globalization, and non-renewable energy use on environmental sustainability in Gulf Cooperation Council (GCC) countries, with the Environmental Kuznets Curve (EKC) hypothesis.
This study investigates the link between economic development and environmental sustainability within the GCC countries of Saudi Arabia, Qatar, Oman, Kuwait, Bahrain, and the UAE, regions heavily reliant on non-renewable resources. Historically, economic growth in the GCC has relied on crude oil production, leading to substantial ecological degradation and the lowest global biocapacity ratios. GCC countries’ combined emissions rank among the top 25 global emitters, and their per capita ecological footprints exceed sustainable levels. However, each GCC state shows distinct economic and environmental profiles, with some (e.g., Bahrain and the UAE) experiencing faster economic complexity growth than others. By examining the Environmental Kuznets Curve (EKC) hypothesis using the Economic Complexity Index (ECoI), this study aims to expand on prior environmental research by including multiple environmental impact metrics-carbon dioxide (CO₂) emissions and ecological footprint per capita (EFpc). This study also explores whether the complex economic structures in GCC countries might eventually lead to sustainable resource management.
Findings:
Economic complexity supports an inverted U-shaped relationship between ECoI and environmental degradation in GCC countries.
Results confirm a statistically significant inverted U-shaped association between ECoI and environmental degradation, where the ECoI initially increases environmental pressure (for both CO₂ and EFpc) before leading to environmental improvements. However, this effect varies by environmental indicator and country. The inverted U relationship is observed in all GCC countries for CO₂ emissions and in only four for EFpc (Bahrain, Kuwait, Saudi Arabia, and UAE).
Increased economic complexity may reduce environmental degradation once GCC economies surpass specific complexity levels, aligning with the EKC hypothesis.
Non-renewable energy consumption (NREW) is positively associated with environmental degradation based on EFpc, but unexpectedly reduces CO₂ emissions in the GCC.
NREW consumption increases EFpc by 7.6%–9.3% for every 1% increase but shows a statistically significant negative association with CO₂ emissions, reducing them by 8.2%–13.9% for every 1% increase. This reduction may reflect GCC governments’ initiatives, including renewable energy investments and demand-side energy efficiency programs.
NREW consumption, despite having mixed effects, highlights the need for GCC countries to transition to cleaner energy while improving energy efficiency.
Globalization exacerbates environmental degradation across the GCC.
For every 1% increase in globalization (measured by the KOF Index), EFpc increases by 0.04%, and CO₂ emissions rise by 0.07%–0.08%. These effects are statistically significant across GCC countries, where economic globalization contributes to resource-intensive industries.
Globalization, without stringent environmental regulations, risks worsening environmental conditions by intensifying production demands.
Economic growth impacts EFpc but shows negligible influence on CO₂ emissions.
Per capita income growth positively correlates with increases in EFpc, underscoring a significant relationship between income levels and environmental degradation. However, no notable effect of GDP per capita on CO₂ emissions is observed, indicating that economic growth alone may not reduce carbon emissions in the GCC.
This suggests a complex role of income in environmental sustainability and the importance of green policies beyond economic growth.