The Double Penalty of Fossil Fuel Imports: Unraveling the Energy-Growth-Environment Nexus in the MENA Region

The Middle East and North Africa (MENA) region faces a structural paradox: it holds nearly 57% of the world’s oil reserves while being highly vulnerable to climate change. This study examines the dynamic relationships between renewable energy (RES), economic growth, and environmental quality in ten MENA countries over 2000–2021 using a panel ARDL model, complemented by cross-sectional dependence and heterogeneity tests. The analysis considers both short- and long-term effects of RES, CO₂ emissions, investment (INV), and fossil fuel imports (FFI). Results show that RES significantly reduce CO₂ emissions and boost investment in the long run, highlighting their key role in sustainable growth. In contrast, fossil fuel imports create a “double penalty” by increasing emissions and constraining investment. The study concludes that energy transition can promote a decoupling of economic growth from environmental degradation, provided that policies are differentiated and adapted to national specificities.