Revisiting the environmental resource curse in MENA: Do export diversification and renewable energy matter?

The MENA region, characterized by its abundant natural resources and escalating environmental challenges, presents a complex scenario in the dynamics of resource and environmental interactions. Although existing research offers diverse insights into the nexus of resource and environmental sustainability, the role of policy variables in moderating this relationship remains insufficiently explored in literature. This study re-evaluates the environmental resource curse in the MENA region by examining the impact of export diversification and renewable energy on the relationship between resource wealth and sustainability. Employing system GMM estimation on panel data from 18 MENA countries spanning 1996 to 2023, this study uses three indicators to comprehensively assess environmental sustainability. The empirical findings confirm the presence of the environmental resource curse in the region: dependence on natural resources consistently and significantly degrades the environment across various specifications, as does export concentration, whereas the adoption of renewable energy consistently improves environmental outcomes. Regarding the moderating effects, negative interaction terms are observed for both moderators (renewable energy and export diversification) with natural resource rents, each with distinct implications. The moderating role of renewable energy underscores its critical importance in reversing the environmental curse in the region, while that of export concentration suggests that effective resource governance can mitigate some adverse effects, particularly in oil-exporting countries. Nonetheless, the substantial direct effect of export concentration (i.e., of greater magnitude than the interaction term coefficient) emphasizes that export diversification is a more viable, long-term strategy for achieving environmental sustainability. Robustness checks across various model specifications and alternative indicators confirm the reliability of these findings. The study concludes with targeted policy recommendations to advance sustainable development and environmental resilience in MENA, among the foremost: expanding renewable energy capacity, promoting environmentally aligned trade diversification, and strengthening environmental governance and regional cooperation.