ICT,energy transition,and environmental quality in the gulf: A second-generation panel analysis

Abstract

The environmental situation in the Gulf states is fragile due to rapid economic growth and a heavy dependence on fossil fuels. ICT diffusion and transitioning to renewable energy sources are considered environmentally beneficial. This study examines the interplay between energy transition, Information and Communication Technology (ICT), and environmental quality, considering the population density, Foreign Direct Investment (FDI), and economic growth of Gulf countries. It uses the 2nd generation “Augmented Mean Group (AMG)” estimation and the “Dumitrescu-Hurlin (D-H)” causality test, utilizing yearly data from 2000 to 2022. While prior research has examined these themes separately, few studies have evaluated the combined impact of ICT and energy transition on environmental outcomes in hydrocarbon-dependent economies. This study fills this gap by offering novel insights into how technological and structural transformations simultaneously influence CO₂ emissions in the Gulf region. The findings divulge that ICT adoption negatively impacts CO₂ emissions, suggesting that digital technologies improve environmental quality through increased energy efficiency, remote work adoption, and intelligent energy management systems. In contrast, the impact of energy transition on CO₂ emissions is negative but statistically insignificant, reflecting the limited integration of renewable energy into the region's energy mix, which is dominated by fossil fuels. The results also reveal that FDI, population density, and economic growth positively impact CO₂ emissions. The D-H causality check yields numerous unidirectional and bidirectional causal relationships, validating the resilience of the AMG results. The findings underscore the need for enhanced renewable energy adoption, environmentally focused ICT and FDI policies, sustainable urban planning, and green economic strategies to moderate CO₂ emissions in Gulf countries.