The relationship between real GDP, CO₂ emissions, and energy use in the GCC countries: A time series approach

Abstract

This paper examines the relationship among real GDP, CO₂ emissions, and energy use in the six Gulf Cooperation Council (GCC) countries. Using annual data for the years 1960–2013, stationarity, structural breaks, and cointegration tests have been conducted. The empirical evidence strongly supports the presence of unit roots. Cointegration tests reveal the existence of a clear long-run relationship only for Oman. Granger causality analysis shows that for three GCC countries (Kuwait, Oman, and Qatar) the predominance of the “growth hypothesis” emerges, since energy use drives the real GDP. Moreover, only for Saudi Arabia a clear long-run relation has not been discovered. Finally, the results of the variance decompositions and impulse response functions broadly confirm our previous empirical findings. Our results significantly reject the assumption that energy is neutral for growth. Notwithstanding, since the causality results are different for the six GCC countries, unified energy policies would not be the good recipe for the whole area.

Keywords:

• economic growth
• CO₂ emissions
• energy use
• GCC countries
• time series

JEL classifications:

• B22
• C32
• N55
• Q43

Public Interest Statement

The understanding of the direction of causality between energy and economic growth could have important policy implications. This research article explores the relationship among real GDP, carbon dioxide (CO₂) emissions, and energy use in the six Gulf Cooperation Council (GCC) countries. It was found that energy is generally expected to play a major role in achieving economic, social, and technological progress and to complement labour and capital in production for Kuwait, Oman, and Qatar. Hence, to ensure sustainable economic growth, all these countries should invest in clean energies (renewable energy resources: solar and wind) and adopt measures of energy efficiency. Nevertheless, since the causality results are different for the six GCC countries, unified energy policies would not be the good recipe for the whole area. Even though there may be political will to construct the common goals and objectives, different policy design for subgroups of member states ought to probably be considered.

Acknowledgments

Comments from Mauro Costantini (Brunel University) and Edoardo Marcucci (Roma Tre University), as well as the editor and the anonymous referees are gratefully acknowledged. However, the usual disclaimer applies.

Notes

1. See the website: http://germanwatch.org/en/9472.

2. See the website: http://data.worldbank.org/data-catalog/world-development-indicators.

3. See the website: https://www.conference-board.org/data/economydatabase/.

Additional information

Funding

Funding. The authors received no direct funding for this research.

Notes on contributors

Cosimo Magazzino

Cosimo Magazzino was born in Grottaglie (TA, Italy) on February 14, 1980. He is an associate professor of Economic Policy and Econometrics at the Department of Political Science, Roma Tre University since January 2007. He received his PhD in “Political Sciences” from 2008, and has a degree in “Public Policies” from July 2005. In July 2010, he also received his master’s degree in “Applied Econometrics” organized by SSEF and ISAE. Moreover, he attended many specialization courses and summer schools. Since 2005, he has been lecturing and research charge at several Italian universities on topics of Economic Policy, Econometrics, Mathematics for Social Sciences, Public Economics, Public Finance, and Macroeconomics. He has conducted studies and researches on various issues of Economic Policy and Public Finance (Welfare State, Thatcherism, Reaganism, size of government, public expenditure, energy policy, and health policy). The scientific production includes over 70 publications.