Spatial effects of trade, foreign direct investment (FDI), and natural resource rents on carbon productivity in the GCC region

Abstract

Background Natural resource rents (NRRs) may determine the environment and economic growth of the GCC countries due to their over-reliance on the natural resource sector. NRRs are the source of income in resource-abundant GCC countries. So, increasing income of these countries could pollute the environment by increasing overall economic activities. Consequently, NRRs could determine carbon productivity in the GCC region through increasing income and carbon emissions. Methods The effects of trade openness (TO), foreign direct investment (FDI), urbanization, and oil and natural gas rents on carbon productivity (CP) are examined in the GCC region from 1980–2021 using the spatial Durbin model. Results The CP of the GCC countries has spillovers in their neighboring countries. Oil rent reduces carbon productivity in domestic economies and the entire GCC region. Natural gas rent, TO, and FDI increase, and urbanization reduces carbon productivity in neighboring economies and the entire GCC region. Moreover, urbanization reduces carbon productivity in domestic economies as well. The study recommends the GCC countries to reduce reliance on oil rent and increase globalization in terms of TO and FDI in the region to promote carbon productivity. Moreover, GCC countries should also focus more on natural gas rent instead of oil rent to raise carbon productivity.