Investigating Low-Carbon Emissions Policy and Energy Consumption in Saudi Arabia: An Empirical Study Using VECM Analysis and Environmental Scenarios

Abstract

Purpose: Saudi Arabia’s aggregate energy consumption increased significantly between 1980 and 2019, leading to a substantial rise in carbon dioxide (CO₂) emissions. This study aims to develop a model that evaluates the impacts of various energy abatement policies on economic growth and CO₂ emissions, in alignment with the Paris Agreement.
Study design/methodology/approach: A Vector Error Correction Model (VECM) is employed to estimate long-run elasticities. Subsequently, abatement scenarios for Saudi Arabia covering the period from 2020 to 2030 are assessed.
Sample and data: The study utilizes time series data to explore the relationships among key variables, including CO₂ emissions, GDP, population growth, and energy consumption in Saudi Arabia.
Results: The VECM findings indicate a long-run relationship among the variables. The results from the three scenarios are as follows: the baseline scenario predicts an increase in carbon emissions, while the two abatement scenarios suggest that, under a low carbon strategy, emissions will decrease throughout the study.
Originality/value: This study underscores critical energy and environmental policies aimed at mitigating carbon emissions and provides valuable insights for national policymakers, potentially contributing to sustainable economic growth.
Research limitations/implications: The study evaluates the impacts of energy abatement policies on economic growth and CO₂ emissions from 1980 to 2030. The findings are vital for assisting policymakers in enhancing energy efficiency while implementing appropriate low carbon strategies to promote economic growth and combat climate change.