1. Introduction
Global environmental challenges have garnered substantial attention from academics, policymakers, and international organizations. Rapid and uncontrolled ecological degradation has represented a substantial challenge, resulting in detrimental implications for ecosystems, human health, and overall welfare [
1]. The main causes of environmental deterioration have been the subject of much debate. The objective consists of identifying the measures that should be implemented to address climate change and alleviate its detrimental impacts [
2,
3]. Both theoretical and empirical studies have delved deeply into what causes environmental degradation. Following the endorsement of the 17 Sustainable Development Goals (SDGs) in 2015 to achieve these goals by 2030, there has been a surge in research interest in this topic. However, achieving these goals requires reducing greenhouse gas (GHG) emissions, promoting a green economy, and other environmental protection strategies [
4].
Identifying potential factors contributing to environmental degradation is a crucial prerequisite for designing and implementing efficient public policies to mitigate climate change. The existing literature has identified several factors contributing to ecological degradation. These factors include, for instance, natural resource abundance, nonrenewable energy demand, economic openness, population growth, and urbanization. Moreover, there have been a few but growing research investigations conducted on the impacts of digitalization and information and communication technologies (ICT) on environmental sustainability [
5,
6,
7,
8]. Previous literature yielded conflicting results regarding the environmental consequences of ICT. While some research has indicated a beneficial influence on the environment, other studies have reached opposite conclusions. On the one hand, digitalization raises demand for products and promotes international trade, which can result in higher energy use and emissions. On the other hand, digitalization can enhance environmental quality by minimizing human activities and mobility through videoconferencing and decreasing GHG emissions from the transportation sector. The consequences of financial development (FD) on the environment have also garnered scholarly interest, although no definitive conclusions have been reached. Indeed, financially developed systems have better liquidity positions and may provide more financial resources. FD can improve environmental quality by fostering environmentally friendly projects and promoting energy transition. However, the financial sector may also promote projects in unsustainable polluting sectors, including fossil fuel energy exploration and exploitation, leading to environmental deterioration [
9]. Finally, some works have focused on industrialization as a driver of environmental quality. On the one hand, industrialization can harm the environment because it is generally associated with increasing energy demand and carbon dioxide (CO
2) emissions. On the other hand, industrialization can improve economic conditions and foster energy transition, thereby contributing to environmental preservation. Indeed, countries that have made significant progress in energy transition are, in fact, industrialized countries. To summarize, the previous discussion suggests the ambiguity regarding the implications of digitalization, FD, and industrialization on the environment. Such ambiguity motivates the present research.
This study explores the repercussions of digitalization, FD, and industrialization on the environment in the Gulf Cooperation Council (GCC) countries between 2000 and 2021. The choice of GCC countries is motivated by several reasons. First, recent years have been marked by a deterioration in the environmental conditions of GCC nations. According to a report by the Organization of Islamic Cooperation (OIC) in 2021, GCC countries were the most significant emitters of CO
2 emissions among all OIC members in 2019 [
10]. Between 2000 and 2017, these countries recorded increased CO
2 emissions per capita. Qatar recorded the highest per capita CO
2 emissions (37.61 metric tons), followed by Kuwait (23.52 metric tons), the United Arab Emirates (22.78 metric tons), Bahrain (21.59 metric tons), Oman (21.59 metric tons), and Saudi Arabia (17.94 metric tons). It is worth mentioning that CO
2 emissions per capita in GCC nations have been above the global average of 4.93 metric tons. Therefore, GCC countries are confronted with significant environmental challenges that require a concentrated effort to address their underlying causes. Second, GCC countries have conducted extensive economic reforms to lower reliance on natural resources and promote industrialization to enhance economic development. In addition, most GCC countries have targeted the promotion of the digital economy through modernization, digitalization, and automation of the production processes. According to statistics from ref. [
11], almost all GCC countries have achieved a 100% internet usage rate among citizens. Additionally, significant progress has been made by countries like the United Arab Emirates and Saudi Arabia in establishing e-government, as they were ranked 13th and 31st globally in 2022 [
12]. These efforts to promote the digital economy and ICT may raise concerns about their environmental effects. Finally, the financial sectors in GCC countries have experienced substantial development during the last decades. FD has been mainly due to the multiple initiatives undertaken by those countries, including the National Programme for Fiscal Sustainability and Financial Sector Development in Oman, the Financial Sector Development Program in Saudi Arabia, and the Financial Services Sector Development Strategy in Bahrain. It would be interesting to explore the implications of digital transformation, FD, and industrialization on the environment in GCC countries.
This research adds to the body of knowledge in many ways. First, while the existing empirical literature has explored the many factors that affect environmental sustainability in GCC nations, such as economic openness and urbanization, there is a lack of studies on the environmental consequences of ICT, FD, and industrialization. Therefore, the present research aims to fill this gap by studying the environmental repercussions of digitalization, industrialization, and FD. Second, the research employs advanced statistical methods, specifically the augmented mean group (AMG), the common correlated effects mean group (CCEMG) and the cross-sectionally augmented autoregressive distributed lag (CS-ARDL), to estimate an augmented STochastic Impacts by Regression on Population, Affluence, and Technology (STIRPAT) model. Such estimators have the advantage of accounting for cross-section dependence (CSD) among cross-sections. This is imperative, as GCC countries are known to be economically and financially interconnected. Furthermore, the study uses the recently developed panel Granger non-causality testing technique of ref. [
13]. In addition, the ecological footprint (EF) was used in the study as a metric of environmental quality. EF is preferred above conventional environmental indicators, such as CO
2 emissions, since it may consider various human environmental impacts, including the carbon footprint [
14,
15].
The remainder of this research is structured as follows.
Section 2 summarizes the extant theoretical and empirical literature. In
Section 3, empirical issues are described, whereas
Section 4 discusses the empirical outcomes. Finally,
Section 5 is reserved for the conclusion, policy recommendations, and limitations.
5. Conclusions and Policy Implications
GCC countries have experienced increased environmental degradation in recent decades. The ongoing debate revolves around the factors that could lead to environmental degradation in these countries. This research adds to the extant literature by exploring the consequences of ICT, industrialization, and FD on the EF in six GCC countries between 2000 and 2021. The empirical analysis relies on the STIRPAT model. It implements various second-generation panel data estimators, namely AMG, CCEMG, and CS-ARDL, which effectively account for CSD and slope heterogeneity. In addition, the recently developed JKS Granger non-causality test was employed to check causal linkages.
The preliminary analysis confirms the presence of slope heterogeneity and CSD across GCC members. Furthermore, the CIPS unit root test indicates the presence of mixed orders of integration, while the cointegration tests provide evidence for long-term linkages. Estimating the long-run effects using the AMG, CCEMG, and CS-ARDL provides interesting findings. First, digitalization and ICT technologies reduce the EF and improve the long-run environmental indicators in GCC countries. Second, industrialization has a long-term detrimental environmental impact. Indeed, the industrial sectors of GCC countries are primarily focused on the oil and gas sectors, which may harm the environment. Finally, the study shows that FD increased the long-run EF, resulting in detrimental environmental consequences. This may be due to the fact that financial systems are providing financial resources to unsustainable polluting projects, leading to environmental degradation. Finally, the causality analysis confirms that all variables, except FD, predict the environmental degradation in GCC countries.
Some implications may be drawn from the current study. First, the findings indicate that ICT reduces the EF and improves environmental quality in GCC countries. Therefore, digitalization and ICT can be further developed and adopted to improve energy efficiency across the different economic sectors and reduce environmental degradation. This can be accomplished by promoting investments in environmentally friendly information technologies and allocating additional financial and human resources to R&D in those technologies. Second, the findings reveal that industrialization has an adverse long-run effect on the environment. Hence, it is mandatory to make more efforts to mitigate the detrimental impacts of industrialization on the environment within GCC countries. This can be achieved by enhancing industrial energy efficiency through operational enhancements, equipment maintenance, and waste heat recycling technologies. Furthermore, stricter environmental regulations may be implemented to reduce the adverse ecological repercussions of the industrial sector. In addition, GCC countries may be interested in creating an Environmental Preservation Fund by imposing taxes on the most polluting firms operating in the industrial sector. This fund may contribute to environmental sustainability and tackle ecological issues, including deforestation and biodiversity loss. Third, it is imperative to account for the detrimental long-term effects of FD on the environment in GCC countries. On the one hand, more efforts should be made to ensure that the financial system supports environmentally friendly projects and provides the necessary resources for their implementation. This can be accomplished by introducing specific frameworks by central banks that mandate a portion of credits to be allocated towards ecologically sustainable initiatives, such as implementing renewable energy projects. On the other hand, promoting green finance and developing the green bond market may help reduce environmental degradation and promote long-term environmental sustainability in GCC countries.
Although this research provided fresh evidence for the environmental implications of ICT, FD, and industrialization in GCC countries, it could be improved in many ways. On the one hand, future studies may employ alternative proxies of ICT that allow the overall development of information and communication technologies to be captured rather than solely focusing on the share of individuals using the internet. On the other hand, implementing methodologies that allow identifying the nonlinear asymmetric impacts of ICT, industrialization, and FD on the environment may be useful for designing specific policy recommendations.