Unveiling the Environmental-Economic Nexus: Cointegration and Causality Analysis of Air Pollution and Growth in Oman

Abstract

This article explores the intricate relationship between environmental degradation, specifically air pollution, and economic growth in the Sultanate of Oman spanning the period from 1990 to 2022. We employ cointegration and vector error correction models to uncover both short- and long-term dynamics in the association between air pollution and economic growth. Fur-thermore, Granger causality analysis is utilized to investigate the causal links between these crucial variables. This data encompasses factors related to environmental quality and various control variables. The empirical results unveil a sustained long-term cointegration connection between the variables. Additionally, our findings highlight a statistically significant positive impact of economic growth and energy consumption on CO2 emissions. Furthermore, the short-term analysis reveals an annual adjustment of approximately 14.1% in N2O emissions dis-equilibrium. The Granger causality study indicates unidirectional causal relationships involving N2O emissions, economic growth, and CO2 emissions. The implications of these findings for Oman's policy landscape are substantial. To effectively reduce greenhouse gas emissions, it is imperative for Oman to establish robust climate change policies. Additionally, the government can play a pivotal role in encouraging and endorsing the use of renewable energy sources, such as green hydrogen, as a promising alternative to traditional oil and gas resources.