Do trade openness and foreign direct investment affect CO2 emissions in the MENA region? New evidence from a panel ARDL regression

This study explores the impact of trade openness and foreign direct investment on CO2 emissions in the MENA region, providing new insights through the Panel ARDL regression. It aids policymakers in balancing economic growth and environmental sustainability. The study employs a Panel ARDL regression model to analyse the dynamic relationship between trade openness, FDI, and CO2 emissions. The study finds robust long-run relationships between Trade Openness, FDI, electricity uses and CO2 emissions, while trade openness reduces emissions. Short-run coefficients vary, with electricity use and growth significantly increasing emissions. The Error Correction Term confirms equilibrium restoration, with 23% of deviations corrected annually. FDI-driven industrial activities and fossil fuel reliance are key contributors to emissions, highlighting the need for cleaner energy sources and stricter environmental policies to mitigate climate impact. The findings guide policymakers in balancing economic growth and environmental sustainability, emphasising the need for cleaner industries, stricter regulations, and investment in renewable energy to reduce CO2 emissions in the MENA region. This study adds value by providing new empirical evidence on the dynamic impact of FDI, trade openness, and economic factors on CO2 emissions in the MENA region using the robust Panel ARDL model.