Water stress, agricultural efficiency, energy use, and CO₂ emissions: Evidence from GCC countries

This study examines the long-run and short-run relationships between water stress, agricultural efficiency, energy use, and CO₂ emissions in six GCC countries over the period 1992–2023. Using second-generation panel econometric techniques that account for cross-sectional dependence and heterogeneity, the analysis applies the Westerlund cointegration test, the Common Correlated Effects Mean Group (CCE-MG) estimator, and an error-correction causality model (ECM). The results confirm a stable long-run equilibrium among the variables. Energy use emerges as the dominant explanatory factor, exerting a positive and statistically significant effect on CO₂ emissions in both the long run and the short run. Water stress significantly affects emissions in the long run, indicating that persistent pressure on freshwater resources influences environmental outcomes through gradual structural and technological adjustment rather than immediate short-run changes. In contrast, agricultural efficiency does not exhibit a statistically significant effect on emissions, suggesting that improvements in water productivity have not translated into measurable emission reductions at the macro level. Robustness checks using alternative lag specifications and Dumitrescu–Hurlin panel Granger causality tests confirm the stability of these conclusions. Overall, the findings highlight the central role of energy dynamics and the long-run environmental implications of water scarcity in GCC economies.