Investigating the LCC hypothesis in the middle East, North Africa, and Turkey (Menat): evidence from second-generation panel techniques

Abstract

Most environmental studies utilize environmental degradation indicators and tend to focus on the demand aspect of the environment, often overlooking its supply dimension. The load capacity factor (LCF) addresses the environment from demand and supply aspects and is employed as a proxy for environmental sustainability (ES). This study digs into the quest of how GDP growth (GDP), renewable energy (RE) consumption, and fossil energy (FE) consumption influenced LCF in selected MENAT countries from 1984 to 2018. For this purpose, the study utilizes second-generation panel data techniques, and reports country-based results. The following findings are obtained. (i) The load capacity curve (LCC) follows an inverted U-shape trajectory in Egypt and Iraq, while a U-shape path in Morocco. (ii) FE consumption worsens ES in Turkey, Iran, Iraq, and in the entire panel. However, RE consumption ameliorates ES in Iraq, Morocco, and in the entire panel. (iii) Konya (Econ Model 23:978-992, 2006) test showed FE consumption has a causal relationship with LCF in Egypt and Morocco. Moreover, there is a unidirectional causality relationship from RE consumption to LCF in Egypt, Iraq, Morocco, and in the entire panel. Lastly, GDP growth is the Granger cause of LCF in Egypt. Country-specific policy recommendations are presented in the last section.