Energy Consumption and Carbon Emissions: An Empirical Study of Saudi Arabia

For several decades, Saudi Arabia has depended on fossil fuels for energy consumption in its sectors, which in turn has increased carbon dioxide emissions. Therefore, it is necessary to estimate the effect of energy consumption on the quality of the environment and explore the role of energy-efficient technological innovation. This study uses a structural time series model (STSM) to examine the efficiency of the energy technological innovation role in Saudi Arabia from 1980 to 2019 based on two models. Findings of long-run elasticities estimated in both models indicate that energy consumption impacts carbon dioxide emissions significantly. Also, the underlying energy demand trend (UEDT) evident in both models implies that over the study period, improvement in the efficiency of energy does not exist. But from 2016 onwards, the UEDT showed a downward slope, because the country became interested in energy efficiency and launched a few energy-efficiency policies and programs in the 2010s. Finally, this study highlights some important energy and environmental policies that can help to mitigate carbon emissions. Recognising the role of energy efficiency in environmental quality may help policymakers to act and apply energy efficiency in the industrial sector. Also, Saudi Arabia’s policymakers have to accelerate the enforcement of energy-efficiency programs with mandatory implementation.