Emissions Intensity, Oil Rents, and Capital Formation in Gulf Cooperation Council Rentier States: Implications for the Energy Transition

This paper investigates whether carbon emission intensity influences capital formation in rent-dependent economies, using the Gulf Cooperation Council (GCC) as a case study. In contrast to conventional growth models, the study tests carbon lock-in as a driver, rather than an outcome, of investment in rentier states and links it empirically to resource curse mechanisms. Using panel data for six GCC countries over 2000–2022, we estimate a fixed effects investment model and use System GMM as a robustness check. Results show that a one standard deviation increase in CO2 intensity is associated with a 2.27 percentage point increase in gross capital formation (GCF) (p < 0.01), consistent with carbon lock-in theory, while oil rents have a significant negative relationship with investment (coefficient = −0.271, p < 0.01), in line with resource curse dynamics. The study contributes by embedding carbon lock-in theory in a standard macro panel investment function, treating emissions intensity as a structural regressor alongside oil rents in the specific context of rentier states. A behavioural interpretation is also offered: high-carbon strategies persist because they continue to yield relatively high short-term returns under existing incentives, so investment systems tend to reinforce carbon-intensive pathways. These insights have implications for both theory and practice, suggesting that screening public projects by emissions intensity, greening sovereign wealth portfolios, and phasing out fossil subsidies may help break carbon-intensive investment inertia.