Institutional Quality, Energy Efficiency, and Natural Gas: Explaining CO2 Emissions in the GCC, 2000–2023

This study investigates whether institutional quality amplifies the emissions-reducing effect of energy efficiency in hydrocarbon-dependent economies. Addressing a gap in the energy–environment literature, it tests how governance conditions shape the effectiveness of technical mitigation strategies. Using panel data from six Gulf Cooperation Council (GCC) countries between 2000 and 2023, we estimate a fixed-effects model with interaction terms between energy intensity (as a proxy for efficiency) and institutional quality (proxied by Control of Corruption). The results show that energy efficiency is associated with lower CO2 emissions, and this relationship is significantly moderated by institutional quality. We also analyze the emissions impact of natural gas consumption and identify a structural shift following the 2014 energy reforms: while gas use was positively associated with emissions before 2014, the post-reform period shows a weaker or reversed effect. Robustness checks using alternative governance indicators—Regulatory Quality and Government Effectiveness—confirm the moderating role of institutions. The study offers new empirical evidence on the energy–institution–environment nexus and introduces a novel interaction-based methodology suited to resource-rich economies undergoing institutional transition.