Export diversification, energy consumption, economic growth and environmental degradation: evidence from Oman

Abstract

Export diversification's role in reducing environmental degradation, especially in oil-dependent countries, has been overlooked. This study investigated the effect of export diversification, along with energy consumption and economic growth as important control variables, on CO₂ emissions and ecological footprint in Oman from 1984 to 2014 by employing the Autoregressive Distributed Lag (ARDL) model. To ensure the stability of the model, robust long-run relationship estimators including Fully Modified Ordinary Least Squares (FMOLS) and Dynamic Ordinary Least Squares (DOLS) were used. The results suggest that export diversification has a positive impact on Oman's environmental degradation. A positive effect of energy on both environmental indicators was found, with a lower effect on CO₂ emissions. Diversification of exports is strongly recommended in Oman by shifting to more energy-efficient, environmentally friendly, and high-tech industries.

KEYWORDS:

• Export product diversification
• ecological footprint
• energy consumption
• EKC hypothesis
• Oman

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 Trade openness index is measured by the sum of imports and exports of goods and services divided by GDP.

2 KOF globalisation index measures globalisation for each country in the world along the economic, social and political dimensions.

3 Trade potential index measures the potential gains from trade by considering trade costs.

4 Trade intensity index compares the value of trade between two countries with the expected value on the basis of their importance in the world.

5 https://www.intracen.org/itc/market-info-tools/trade-statistics/.

6 https://oec.world/en/profile/country/omn

7 https://databank.worldbank.org/source/world-development-indicators

8 https://www.footprintnetwork.org/

9 To see more details regarding the appropriate methodology for time series data analysis see Stern (2017).

10 Since the results of the three unit root tests are similar; here, the results of only ADF unit root test are presented. The other tests’ results are available on request.

11 Shahbaz, Gozgor, and Hammoudeh (2019) categorised the export basket diversification into three forms namely; horizontal (economy diversifies in the same sector in which new products are added to the existing export baskets within the same sector), vertical (economy diversifies by shifting from the primary to the secondary or tertiary sectors) and diagonal (re-export: economy diversifies by using imported goods to produce manufactured products to export).

12 Hartmann et al. (2017) calculated the Product Emission Intensity Index (PEII) for 786 products, which makes it possible to analyse what products are associated with higher emission intensity.

13 The Environmental Performance Index (EPI) ranks 180 countries based on 32 environmental performance indicators across 11 issue categories. Overall EPI rankings indicate which countries are best addressing the environmental challenges that every nation faces (https://epi.yale.edu).