Analyzing the Mutual Impact between Environmental Pollution and Economic Development in The Kingdom of Saudi Arabia

Using a proposed model estimated by the two-stage least squares method (2SLS) for the years 1990 to 2020, this study aimed to quantify the relationship between environmental degradation and economic development in Saudi Arabia. The study showed that an increase in domestic consumption of refined oil products by 10% increased carbon dioxide emissions by 8.05%. And increasing the estimated amount of carbon dioxide emissions by 10% leads to a decrease in the worker productivity and the invested capital productivity by 2.11% and 7.58% for each, respectively. The equations of the structural form and predicted internal variables of the proposed model showed the possibility of increasing the real GDP from 3060.53 billion riyals in 2022 to 3638.92 billion riyals in 2030, in light of reducing carbon dioxide emissions. That indicates environmental protection and economic development are two inseparable concepts in the long term, and the expected increase in GDP correlated with environmental protection. The study recommends the following: (1) Developing eco-tourism, mountain and beach, for the Red Sea and the Arabian Gulf, (2) completing the NEOM city project according to the Kingdom’s 2030 vision, (3) urging foreign companies to move its headquarters to the Kingdom of Saudi Arabia.