Carbon dioxide emissions, economic growth, energy use, and urbanization in Saudi Arabia: evidence from the ARDL approach and impulse saturation break tests

Abstract

This study investigates the existence of long-run relationship between CO₂ emissions, economic growth, energy use, and urbanization in Saudi Arabia over the period 1971-2014. The autoregressive distributed lag (ARDL) approach with structural breaks, where structural breaks are identified with the recently impulse saturation break tests, is applied to conduct the analysis. The bounds test result supports the existence of long-run relationship among the variables. The existence of environmental Kuznets curve (EKC) hypothesis has also been tested. The results reveal the non-validity of the EKC hypothesis for Saudi Arabia as the relationship between GDP and pollution is positive in both the short and the long run. Moreover, energy use increases pollution both in short and long run in the country. On the contrary, the results show a negative and significant impact of urbanization on carbon emissions in Saudi Arabia, which means that urban development is not an obstacle to the improvement of environmental quality. Consequently, policy-makers in Saudi Arabia should consider the efficiency enhancement, frugality in energy consumption, and especially increase the share of renewable energies in the total energy mix.

Keywords: CO2 emissions; Economic growth; Energy use; Environmental Kuznets curve; Impulse saturation break tests; Saudi Arabia; Urbanization.