Impact of Energy Intensity, R&D, Trade Openness, and Financial Market Development on Carbon Productivity in MENA: A Spatial Analysis

Raising carbon productivity (CP) is a major challenge for economies to support sustainable growth. The literature is scant in investigating CP and is missing in the Middle East and North Africa (MENA). Thus, we aim to explore the effects of trade openness (TO), research and development (R&D), financial market development (FMD), and energy intensity (EI) on CP in 17 MENA countries from 2000 to 2019. The spatial Durbin model (SDM) is applied to capture the local and spillover impacts of all variables on the CP. The findings suggest that energy intensity reduces the CP domestically and in the whole MENA region. FMD does not affect local CP but helps raise the CP of neighbors and the whole MENA region. R&D raises the CP of local economies but has insignificant effects on neighbors. TO reduces the local CP and raises the CP of neighboring countries. Furthermore, the whole effect of TO is positive and TO helps to raise the CP in the entire MENA region. Moreover, the results substantiate the spillovers of CP among the MENA countries. On the whole, EI is reducing the CP and TO, R&D, and FMD are raising the CP in the MENA region. Thus, the study recommends reducing EI and promoting trade openness, R&D activities, and FMD in the MENA region to raise CP.