From Industrial Expansion to Green Transition: Revisiting Climate Change Dynamics in Oil-Producing Countries

Authors

  • Seyed Fakhreddin Fakhrhosseini * Department of Management and Accounting, Karaj Branch, Islamic Azad University, Karaj, Iran. https://orcid.org/0000-0001-5955-1913
  • Ricardo Marcão NECE-UBI, Universidade da Beira Interior, 6201-001 Covilhã, Portugal; ISLA Santarém - Polytechnic University, 2000-029 Santarém, Portugal. https://orcid.org/0000-0003-3277-3078
  • Alireza Fekri Department of Financial Management, Karaj Branch, Islamic Azad University, Karaj, Iran.

https://doi.org/10.48313/iee.v2i1.70

Abstract

Oil-producing countries play a critical role in global greenhouse gas emissions due to their structural dependence on fossil fuels. This study examines the dynamic effects of economic growth, industrialization, Foreign Direct Investment (FDI), renewable energy consumption, and the Human Development Index (HDI) on Climate Change (CE) in selected oil-producing economies over the period 2005–2025. Using a Panel Vector Autoregression (Panel VAR) framework, alongside Impulse Response Functions (IRF) and Forecast Error Variance Decomposition (FEVD), the study explores both short-run and long-run dynamic interactions among the variables. The findings reveal that industrialization is the most persistent and influential driver of CE, accounting for more than 6% of environmental fluctuations in the long run. In contrast, renewable energy consumption and human development exhibit weak and statistically insignificant mitigating effects within the dynamic framework. Moreover, the impacts of FDI and economic growth on climate change remain relatively limited over extended forecasting horizons. The results suggest that the carbon-intensive industrial structure of oil-dependent economies continues to dominate environmental outcomes, while the current scale of renewable energy adoption remains insufficient to offset environmental degradation. The study highlights the necessity of green industrial transformation, renewable energy expansion, and sustainability-oriented development policies to achieve long-term environmental sustainability.

Keywords:

Climate change, Oil-producing countries, Industrialization, Renewable energy consumption, Human development index, Panel vector autoregression

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Published

2026-03-19

Issue

Vol. 2 No. 1 (2026): Innovations in Environmental Economics (IEE)

Section

Articles

How to Cite

From Industrial Expansion to Green Transition: Revisiting Climate Change Dynamics in Oil-Producing Countries. (2026). Innovations in Environmental Economics , 2(1), 67-80. https://doi.org/10.48313/iee.v2i1.70

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