Decarbonization in MENA Countries : An Empirical Analysis of Policy Impacts

This paper empirically examines the multiple impacts of alternative, major fiscal instruments on decarbonization in countries in the Middle East and North Africa. It also examines the effects of decarbonization pathways on decarbonization, using a database covering 41 countries, including countries in the Middle East and North Africa region. The analysis uses several methods to compare and contrast the findings and test their robustness. These new estimates contribute to the literature seeking to understand the pros and cons and effectiveness of various policy instruments in promoting decarbonization, with particular focus on the Middle East and North Africa region. The principal findings include the following. Oil subsidies among the region’s oil producers strongly and positively impact higher carbon dioxide emissions. This effect seems to work through the energy consumption path. Even after controlling the consumption effect, there remains a direct net effect of subsidies on carbon dioxide, likely arising from other sources such as manufacturing. Comparing three groups—all 41 countries, only countries in the Middle East and North Africa, and only oil producers in the Middle East and North Africa—the adverse effect of oil subsidies on carbon dioxide emissions matters only for oil producers in the Middle East and North Africa, not the other two groups. Flaring contributes to carbon dioxide emissions for oil producers in the Middle East and North Africa. Oil subsidies do not have a significant effect on short-run or long-run economic growth. Thus, reducing subsidies does not adversely impact economic growth. This is true for all countries, including oil exporters, in the Middle East and North Africa.