Oil rents and greenhouse gas emissions: spatial analysis of Gulf Cooperation Council countries

The dependence of oil production in the Gulf Cooperation Council (GCC) region may have environmental consequences. This research explores the nonlinear effects of oil rents and the economic growth of six GCC countries on their per capita CO₂, CH₄, N₂O, and Greenhouse Gas (GHG) emissions, considering spatial linkages through 1980–2014. We apply fixed effects (FE) and corroborate the spatial dependency in all estimated pollution models. Spatial Durbin model (SDM) is utilized to estimate the direct and spillover effects. We find the inverted U-shaped relationship of economic growth with CO₂, CH₄, N₂O and GHG emissions, and of oil rents with CH₄ and GHG emissions. Monotonic positive effects of oil rents on CO₂ emissions and U-shaped relationship between oil rents and N₂O emissions are also found. Urbanization has positive effect on the CO₂, CH₄ and GHG emissions and has negative effect on N₂O emissions. Financial market development (FMD) has negative effects on all types of investigated emissions. Foreign direct investment (FDI) has negative effects on CO₂ and N₂O emissions. Energy use has positive effects on CO₂ and N₂O emissions. Further, the neighboring spillover effects of economic growth, oil rents, urbanization, FDI, energy use and FMD are found statistically significant for some investigated emissions. Hence, oil rents, energy use, urbanization and economic growth are responsible for environmental degradation of home and neighboring countries in the GCC region, and we recommend implementing tighter laws to protect the environment.