The Impact of Economic Diversification on CO2 Emissions in MENA Countries: ARDL Panel Data Method
Authors
1
Prof., Department of Economics, Faculty of Economics and Management, Tabriz University, Tabriz, Iran.
2
M.Sc. Student in Economics, Faculty of Economics and Management, Tabriz University, Tabriz, Iran.
10.22034/eiat.2025.230837
Abstract
Nowadays sustainable development is one of the most vital concerns of all countries. Therefore, researchers aim to investigate the economic, social and environmental dimensions of development. Considering the great importance of economic diversification in improving economic growth and increasing welfare, this study aims to investigate EKC in the entire economy and also evaluate the effect of diversification on CO2 emissions in MENA countries during 1974-2020 applying ARDL panel data and using PMG approach. The results show that energy consumption in the long run, leads to an increase in CO2 emissions, and in the short run, it leads to a decrease in CO2 emissions. According to this result, an increase in energy consumption, which is mainly caused by increased production, may be detrimental to the environment in short-run. In the long-run, however, due to the improvement of production technology and the increase in clean energy production, it will lead to a reduction in pollution. Also, the value added of the whole economy does not have a significant effect on the environmental quality in short run, but it has a negative and significant effect on pollution in the long run. This means that the countries have achieved pollution reducing policies in the long term and have combined the increase in economic growth with the reduction in environmental degradation. Regarding the economic diversification, in the long run, the value added of sectors 6 (transportation and communication) and 7 (other activities) confirms EKC hypothesis and the existence of an inverted U-Shaped relationship between value added and pollution. Therefore, the increase in activity in these sectors initially leads to an increase in pollution, and after passing a certain point, an increase in value added leads to an improvement in the quality of the environment. Also, sector 1 (agriculture, hunting, forestry, fishing), 4 (construction), and 5 (wholesale, retail, restaurant and hotel) show a U-shaped relationship. The reason for this result can be the fact that in these sectors, after passing a certain amount of production, the production technology changes and the use of polluting technology leads to increased pollution. In sector 3 (production), value added has a positive significant linear relationship with environmental pollution, meaning that a polluting technology is applied for production activities. It is worth mentioning that in sector 2 (mining, extractive and production industries including electricity, gas and water), there is no relationship between value added and the environment.
Keywords
Subjects
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