Nexus between energy efficiency, green investment, urbanization and environmental quality: Evidence from MENA region

Abstract

Environmental protection holds a paramount position in the pursuit of sustainable development. The existing body of literature has extensively examined various driving forces for environmental enhancement, including renewable energy sources, innovation, and governmental interventions. This study aims to assess the impact of green investment, energy efficiency, and urbanization on achieving environmental sustainability in the MENA region during the period 2004-2019. A comprehensive set of econometric tools has been employed to achieve this goal, including the CADF and CIPS panel unit root tests, error correction-based panel cointegration analysis, Cross-sectional ARDL, and asymmetric ARDL models. The key findings of this research are as follows: Cross-sectional dependency and homogeneity tests demonstrated that the research units shared common dynamics and heterogeneity properties. The stationarity tests based on CIPS and CADF indicated that all variables became stationary after the first differencing. The panel cointegration analysis established a long-term relationship between green investment (GI), energy efficiency (EE), urbanization (UR), and environmental sustainability (ES) in MENA nations. Empirical model estimations using Cross-sectional ARDL revealed significant contributions of GI, EE, and UR to ES in the long and short run. The asymmetry assessment uncovered a nonlinear relationship between the explanatory and dependent variables, both in the long and short run. Specifically, the asymmetric coefficients of GI, EE, and UR displayed negative statistical significance at the 1% level, highlighting their significant roles in promoting environmental sustainability. In light of these findings, this study provides valuable insights for policymakers to formulate strategies to further environmental sustainability in the MENA region.