Energy, FDI, and Agricultural Sustainability in Egypt: Environmental Governance as a Moderating Factor

Abstract

Egypt's agricultural sector faces mounting pressure from rising energy consumption, foreign direct investment (FDI), and climate change, compounded by weak environmental governance and binding water constraints, yet no study has jointly quantified these channels or their distributional consequences. This study examines how agricultural energy consumption, FDI, and climate-related water scarcity jointly shape agricultural sustainability in Egypt and evaluates the extent to which environmental governance moderates these effects. We combine a Vector Error Correction Model for Egypt (1980–2024), a Fixed-Effects panel model for six North African countries (2000–2024), and an IMPACT-CGE simulation of 2020–2040 policy scenarios. Agricultural energy consumption raises CO2 emissions (long-run elasticity = 0.141, p < 0.01); FDI increases the ecological footprint by 0.247%, an effect that reverses once female parliamentary representation exceeds 18.5% (interaction coefficient = −0.068, p < 0.01), a threshold that most plausibly proxies broader institutional development rather than gender representation per se. A comprehensive rural-development scenario yields a realistic annual economic surplus of USD 2.8 billion by 2040 (benefit–cost ratio 4.5:1), but a structural water deficit of 15 billion m3 makes reducing rice area from 1.6 to 0.7 million feddans unavoidable, displacing over 200,000 farming families. These results indicate that agricultural sustainability in Egypt is technically achievable and economically attractive, but only if subsidy reform, land-tenure formalization, targeted credit, and livelihood-transition support are pursued jointly with water management and governance strengthening, offering a transferable framework for other water-stressed agricultural economies.