The impact of renewable energy on CO2 emissions in Middle Eastern and BRICS economies

Environmental pollution, exacerbated by rising CO2 emissions and deteriorating air quality, presents significant challenges to sustainable development worldwide. This study investigates the factors influencing environmental pollution in Middle Eastern and BRICS countries from 1995 to 2020, employing various econometric methods, including CIPS and CADF unit root tests, the Westerlund panel cointegration test, and the Pairwise Dumitrescu–Hurlin panel causality test, along with robustness checks via DOLS. The results for BRICS nations indicate a unidirectional causality from renewable energy consumption to CO2 emissions, suggesting that increased renewable energy usage effectively lowers emissions, although CO2 emissions significantly affect energy consumption without reciprocal influence. In contrast, Middle Eastern countries reveal a bidirectional causality between renewable energy and CO2 emissions, indicating that increases in renewable energy not only mitigate emissions but also respond to emission level changes. Notably, energy consumption neither significantly influences CO2 emissions nor is affected by them in this region. In both regions, trade openness influences CO2 emissions unidirectionally, while FDI shows no significant predictive power for emissions levels. The DOLS results demonstrate that a unit increase in renewable energy reduces CO2 emissions by 0.22% in the Middle East and by 0.66% in BRICS countries, emphasizing the effectiveness of renewable energy investments in mitigating climate change. These findings underline the importance of developing policies that promote renewable energy while carefully examining the impacts of FDI and trade on emissions.