Environmental Dynamics in the Case of Saudi Arabia: Is There a Trade-off Between Growth Constraints and Ecological Dimensions?

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Does it make sense for a major net oil-exporting country like Saudi Arabia (where net oil revenues accounted for over 60% of national income in 2022) to prioritize environmental management and pursue a new economic development strategy that diverges from its historical approach? The answer to this question is a priori positive, especially since the political and policy decision makers have expressed their willingness to move toward a more sustainable and ecologically friendly growth model in the future. As a result, this line of inquiry has led to the development of the current research, which aims to examine the long-term relationship between economic growth, on the one hand, and environmental pollution, on the other, in the case of Saudi Arabia during the period 1960-2021. To do this, our study used the Autoregressive Distributed Lag (ARDL) model to simultaneously detect the short- and long-run effects of all the variables: gross domestic product (GDP), energy consumption (EC), agricultural production (AGR), life expectancy (LE), and population density (PD) on CO2 emissions. Our analysis revealed the following results: first, that GDP, EC, and PD have positive and significant effects on CO2 emissions in the short and long run. Second, agriculture (AGR) and life expectancy (LE) have positive and significant effects on CO2 emissions in the short run, but they have no significant effect in the long run. The negative coefficient of squared GDP confirms the second phase of the famous Environmental Kuznets Curve (EKC) hypothesis: that CO2 emissions initially increase with income, but eventually decrease when the environmental quality becomes one of the basic social needs and a primary good, which is aligned with the findings of John Rawls, Amartya Sen, and Martha Nussbaum. This study aids policymakers in better analyzing the environmental impacts of economic development in Saudi Arabia. It offers valuable insights for managing environmental quality and provides effective solutions to address the trade-off between energy revenue and environmental threats. These findings align with the goals outlined in the Saudi government’s Vision 2020/2030.