Unveiling the Environmental–Economic Nexus: Cointegration and Causality Analysis of Air Pollution and Growth in Oman

Abstract

The complex relationship between environmental degradation—more especially, air pollution—and economic growth in the Sultanate of Oman between 1990 and 2022 is examined in this article. To identify short- and long-term dynamics in the relationship between air pollution and economic growth, we use vector error correction models and cointegration. Additionally, Granger causality analysis is used to look into the causal relationships between these important variables. This dataset includes several control variables as well as environmental quality-related factors. The empirical findings demonstrate that the variables have a consistent long-term cointegration relationship. Furthermore, our results show that energy consumption and economic growth have a statistically significant positive effect on CO2 emissions. Moreover, an annual adjustment of about 14.1% in N2O emission disequilibrium is revealed by the short-term analysis. The Granger causality study shows that there are unidirectional causal linkages between CO2 emissions, economic growth, and N2O emissions. These results have significant policy-related ramifications for Oman. Oman has to implement strong climate change policies in order to effectively cut greenhouse gas emissions. Furthermore, as a potential replacement for conventional oil and gas resources, the government can be a key player in promoting and supporting the use of renewable energy sources like green hydrogen.