Do energy consumption, urbanization, and industrialization play a role in environmental degradation in the case of Saudi Arabia?

Abstract

This study tries to explore empirically the nature of the link among energy consumption, environmental degradation, trade, industrialization, urbanization, and economic growth concerning the Kingdom of Saudi Arabia's economy for a time series of data spanning from 1971 to 2019. To investigate the cointegration, the long-run relationship, and to decide the direction of causality we apply the Autoregressive Distributed Lag and the Vector Error Correction Model technologies. Our empirical findings reveal that a rise in energy consumption and environmental degradation increases economic growth; however, energy has a significant contribution to the deteriorating environment. Besides, results show the presence of a feedback effect in the long-run among the different variables. In the short-run, energy use, trade, and urbanization, Granger causes economic growth; while growth, environment, industrialization, and urbanization Granger causes energy consumption. The Saudi policymakers must consider the leading role played by trade, urbanization, and industrialization in improving economic growth and harming environmental quality by launching efficient energy policies.