This study empirically examines the impact of economic policy uncertainty (EPU) on environmental sustainability in the Middle East and North Africa (MENA) region, using the Environmental Kuznets Curve (EKC) hypothesis as a theoretical framework. Drawing upon panel data from 13 selected MENA countries over the period 1997 to 2023, the analysis applies advanced econometric techniques—Generalized Least Squares (GLS) and Panel-Corrected Standard Errors (PCSE)—to estimate the effects of key economic and energy-related variables on greenhouse gas (GHG) emissions, a proxy for environmental degradation.

The core objective of this research is to assess whether uncertainty in economic policy undermines the region’s efforts toward environmental sustainability, particularly by examining how EPU influences carbon emissions and interacts with variables such as gross domestic product per capita (GDP per capita), renewable energy consumption (REC), and foreign direct investment (FDI). The study employs the World Uncertainty Index (WUI) to represent EPU, which captures global perceptions of uncertainty in economic policymaking based on international economic reports and media coverage.

The empirical results demonstrate a statistically significant and positive relationship between EPU and GHG emissions. Specifically, a one-unit increase in the WUI index is associated with an average rise of 0.00072 to 0.00076 kilotons of GHG emissions. This finding suggests that elevated policy uncertainty creates an unfavorable environment for environmental investment and planning. It delays or disrupts the implementation of clean energy projects, diminishes the attractiveness of green technology investments, and hampers environmental innovation.

In contrast, renewable energy consumption has a statistically significant and negative impact on GHG emissions. An increase in the share of renewable energy consumption results in a reduction of emissions by 0.22 to 0.43 kilotons, underscoring the critical role that clean energy transitions play in reducing environmental harm. This result strongly supports policy initiatives aimed at promoting renewable energy infrastructure in MENA countries.

Furthermore, the study validates the EKC hypothesis by revealing a non-linear relationship between GDP per capita and environmental degradation. The results indicate that at lower levels of income, economic growth contributes to increased emissions. However, after surpassing a certain income threshold, further economic development leads to reductions in emissions. This pattern reflects the combined effects of industrial restructuring, public demand for environmental quality, improved regulatory mechanisms, and technological innovation.

The role of FDI in influencing environmental sustainability is mixed. While its coefficients are generally negative—suggesting a potential to reduce emissions through technology transfer and cleaner production processes—the statistical significance of this effect varies across models. This implies that the environmental impact of FDI depends on the nature of investments and the presence of environmental regulations that can guide FDI toward sustainable sectors.

A country-level analysis of WUI and GHG emission trends shows that nations such as Iran, Iraq, and Egypt face high levels of policy uncertainty alongside elevated emissions, due to political instability, institutional weaknesses, and economic reliance on fossil fuels. In contrast, relatively stable countries like Morocco and Kuwait exhibit lower levels of both uncertainty and emissions, reflecting stronger governance and more predictable policy environments.

The findings underscore the importance of reducing economic policy uncertainty to foster long-term environmental and economic sustainability in the MENA region. Policymakers are urged to adopt transparent, consistent, and long-term strategies that support clean energy transitions, attract green investment, and build institutional resilience. Without addressing EPU, efforts toward sustainable development and climate mitigation in MENA are likely to remain inadequate.

This study contributes to the growing literature on the economic determinants of environmental sustainability and offers novel insights into how uncertainty in policymaking can shape environmental outcomes, particularly in resource-dependent and institutionally fragile economies.