Bilateral trade of Saudi Arabia in low carbon technology with GCC countries: assessing the impact of economy size and carbon emissions using modified gravity model

Purpose In 2023, Saudi Arabia led Gulf Cooperation Council (GCC) trade in low-carbon technology (TLCT), exporting over $1.2 billion in solar panels and technologies. Its focus on TLCT trade drives regional sustainability and economic growth, solidifying its role as the GCC's hub for sustainable trade. Design/methodology/approach The current study uses a modified gravity model to assess the bilateral TLCT between Saudi Arabia and its trading partners of the GCC. The model uses economic size (mass) as the numerator and carbon emissions ratio as the denominator, replacing the traditional distance variable to account for environmental disparities as trade barriers. Cross-section non-linear autoregressive distributed lag model estimates are used to estimate the modified gravity model. Findings The estimates reveal that Saudi Arabia's economic size positively impacts TLCT in both the short and long run, while negative shocks reduce the trade. Similarly, the increase in economic size of trading partners enhances TLCT volumes and vice versa. The higher carbon emissions ratio indicates more emissions in Saudi Arabia relative to its partners, hindering the LCT trade, while a lower ratio facilitates trade by reducing environmental trade barriers. Originality/value The current study presents novel and distinct contributions to the literature on trade and sustainability. First, it estimates the dynamics of TLCT that have been underexplored in empirical modelling. Second, it modifies the traditional gravity model of trade by introducing the emissions gap as a trade barrier, thereby integrating environmental performance with TLCT. Third, it applies a non-linear modelling approach to capture asymmetric oscillations in the effects of economic size and the emissions gap on TLCT. Highlights