Energy diversification and economic growth nexus revisited: cross-regional empirical evidence from the CAR GCC and SAARC

Purpose The increasing use of fossil fuels and energy security concerns have led to a growing emphasis on sustainable economic growth and transitioning to a green energy system. This study aims to examine the relationship between energy diversification and economic growth in Central Asian Republics (CAR), Gulf Cooperation Council (GCC) and South Asian Association for Regional Cooperation (SAARC) from 2005 to 2022. Design/methodology/approach This study examines the relationship between energy diversification and economic growth in CAR, GCC, and SAARC from 2005 to 2022 by using nonlinear panel autoregressive distributed lag and augmented mean group estimating methodologies. Findings The findings demonstrate that with an increase in the long-term diversity of energy sources, developed nations like the GCC and developing nations like Kazakhstan, Kyrgyzstan and Uzbekistan from Central Asia and India, Bangladesh and Pakistan from South Asia experience favourable economic growth. However, energy diversification has an inverse relationship with economic growth in least-developed economies like Afghanistan, Sri Lanka, Turkmenistan and Tajikistan in the short run. Thus, energy diversification bolsters economic growth in developed and developing economies. Diversifying energy sources may yield positive long-term effects, but it is equally important to consider the short-term consequences. Research limitations/implications Diversifying energy sources may yield positive long-term effects, but it is equally important to consider the short-term consequences. Since a variety of energy sources can support environmentally friendly development, this paper presents significant policy implications, advocating for strategic investments in renewable and alternative energy sources such as biofuels to enhance sustainable development. Practical implications The findings demonstrate that with an increase in the long-term diversity of energy sources, developed nations like the GCC and developing nations like Kazakhstan, Kyrgyzstan and Uzbekistan from Central Asia and India, Bangladesh and Pakistan from South Asia experience favourable economic growth. However, energy diversification has an inverse relationship with economic growth in least-developed economies like Afghanistan, Sri Lanka, Turkmenistan and Tajikistan in the short run. Thus, energy diversification bolsters economic growth in developed and developing economies. Diversifying energy sources may yield positive long-term effects, but it is equally important to consider the short-term consequences. Since a variety of energy sources can support environmentally friendly development, this paper presents significant policy implications, advocating for strategic investments in renewable and alternative energy sources such as biofuels to enhance sustainable development. Social implications Since a variety of energy sources can support environmentally friendly development, this paper presents significant policy implications, advocating for strategic investments in renewable and alternative energy sources such as biofuels to enhance sustainable development. Originality/value This study represents the first attempt to examine the nexus between energy diversification and economic growth within the CAR, the GCC and the SAARC. It is critical to recognize that all these regions are significantly dependent on natural resources, specifically oil, gas and agricultural and textile products. These regions face challenges in diversifying their economies away from traditional sectors towards a more diversified economic base. Furthermore, these regions hold strategic importance on the global stage. The CAR and GCC are essential for global energy supplies, while SAARC comprises key geopolitical players in South Asia.