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This study examines the long-run and distributional determinants of CO2 emissions in Saudi Arabia (1970–2021) by integrating economic growth, energy consumption, foreign direct investment (FDI), natural resource rents, and urbanisation within a unified framework. Johansen cointegration, Fully Modified Ordinary Least Squares (FMOLS), Dynamic Ordinary Least Squares (DOLS), Canonical Cointegrating Regression (CCR), and a Vector Error Correction Model (VECM) establish long-run relationships and causality; quantile regression identifies distributional heterogeneity. The principal novel finding is a countercyclical, regime-dependent mitigation role for natural resource rents: rents exert no significant effect at low-emission quantiles but generate negative effects from the median quantile onward (−0.04 to −0.06), precisely when emissions and oil revenues are simultaneously elevated. This distributional asymmetry, invisible to mean-based estimators, implies that hydrocarbon revenues provide a high-regime fiscal buffer for environmental investment. Aggregate FDI is environmentally neutral across all specifications, indicating the technique effect operates through fiscal channels rather than investment channels. Energy consumption drives emissions with near-unity elasticity, confirming carbon lock-in, and economic growth shows no decoupling. These findings provide quantitative foundations for fiscal rules linking oil revenue windfalls to green investment under Vision 2030.
Khan et al. (Thu,) studied this question.