The roles of foreign direct investments, economic growth, and capital investments in decarbonizing the economy of Oman

Abstract

Oman is a Middle Eastern country that has traditionally been monotonically reliant on its indigenous fossil fuel supplies. Besides, the nation has also been a surplus producer and net exporter of oil which further highlights the prolonged fossil fuel dependency of Oman. Consequently, despite flourishing economically, environmental quality in Oman has persistently aggravated. These opposing economic and environmental performances have necessitated Oman to identify the factors which can enable Oman to decarbonize its economy for tackling the environmental concerns faced by the nation. Against this backdrop, this study aims to examine the symmetric and asymmetric effects of foreign direct investments, economic growth, and capital investments on carbon dioxide emissions in Oman during 1980-2019. Using relevant econometric estimation methods for controlling structural break concerns in the data, the findings reveal evidence of asymmetric environmental impacts associated with shocks to the nation's foreign direct investment inflow, economic growth, and capital investment figures. Specifically, it is witnessed that positive shocks to the levels of foreign direct investment inflows, economic growth, and capital investments boost carbon dioxide emissions both in the short and long run. On the other hand, negative shocks to the levels of foreign direct investment inflows and economic growth are witnessed to reduce the emissions. Besides, the findings also validate the environmental Kuznets curve and pollution haven hypotheses in the context of Oman. Hence, considering these key findings, it is recommended that Oman should ideally pursues green economic growth policies by restricting inflows of unclean foreign direct investments and green its financial sector in order to collectively minimize its carbon dioxide emission figures.

Keywords: CO2 emissions; Capital investments; Economic growth; Environmental sustainability; Foreign direct investments; Oman; Renewable energy transition.