Environmental Degradation, Renewable Energy, and Non-Renewable Energy Consumption in Saudi Arabia: An ARDL Bound Testing Approach

Saudi Arabia’s Vision 2030 is closely tied to CO2 emissions and energy consumption issues. This initiative aims to modernize the country’s economy, diversify its energy sources, and enhance sustainability. This paper examines the relationships among CO2 emissions, Renewable Energy Consumption (REC), and Non-Renewable Energy Consumption (NREC) in Saudi Arabia, from 1990 to 2019. To assess the stationarity of the panel time-series data, the Augmented Dickey–Fuller (ADF) and Phillips–Perron (PP) tests were initially used. Given that the data exhibited a mixed order of integration, the Autoregressive Distributed Lag (ARDL) framework was employed. Three different lag selection criteria were applied for cointegration, using CO2 emissions as the dependent variable. Additionally, the direction and significance of causality were analyzed within the ARDL framework. Robust tests were conducted to evaluate the generalizability of the study’s findings. We demonstrated a significant long-term relationship between climate change and both REC and NREC in Saudi Arabia. The findings indicate that in the long run, a 1% increase in REC leads to a 0.21% decrease in CO2 emissions. Furthermore, a 1% increase in NREC corresponds to a substantial 53.4% reduction in CO2 emissions. Finally, policy recommendations were proposed in alignment with Saudi Arabia’s Vision 2030.