Renewable Energy, Natural Resource Rents, and Environmental Quality in GCC Countries

Environmental implications of resource dependence remain a central concern for hydrocarbon-based economies undergoing energy transition. Using panel data for GCC countries over 1990–2024 and second-generation econometric techniques that account for cross-sectional dependence and heterogeneity, this study identifies a stable long-run relationship between natural resource rents, renewable energy, and CO2 emissions. The results show that a 1% increase in natural resource rents is linked to a 0.21% rise in CO2 emissions, highlighting the persistence of carbon-intensive economic structures. By contrast, renewable energy is associated with a 0.15% reduction in emissions, although its environmental contribution remains modest. The interaction effect is negative (−0.048) but only partially robust, indicating that renewable energy weakens, but does not fully offset, the environmental pressure associated with resource dependence. These findings suggest that energy transition in GCC economies remains gradual and structurally constrained, requiring not only renewable expansion but also deeper transformation of hydrocarbon-based growth models.