Studying How Macroeconomic Variables Affect Carbon Dioxide Emissions in Saudi Arabia: An ARDL Bounds Testing Approach to Cointegration

Most countries around the world face significant environmental challenges due to their heavy reliance on non-renewable energy sources for economic growth. Therefore, a careful study of air quality in these countries is crucial, given the increasing impact of air pollution on public health and environmental sustainability. So, this study investigates the intricate relationships between carbon dioxide (CO2) emissions from power industry (Energy) and three key economic drivers: manufacturing, trade, and foreign direct investment (FDI) in Saudi Arabia from 1990 to 2023. The Autoregressive Distributed Lag (ARDL) model was employed to explore both short-term and long-term dynamics. The optimal model identified was ARDL(1,4,1,4). The findings suggest that manufacturing and trade exert a negative effect on CO2 emissions, whereas FDI contributes positively to the long run. The error correction model (ECM) indicates that economic adjustments occur over approximately 2 years.