Asymmetric Moderating Role of Geopolitical Risk in the Relationship Between Oil Rents and CO2 Emissions in Saudi Arabia: An NARDL Approach

Oil is a major source of income and emissions in the Saudi economy. Thus, this study examines the symmetrical and asymmetrical impacts of oil rents (ORs) on CO2 emissions using data from 1970 to 2024. For this purpose, the Nonlinear Autoregressive Distributed Lag (NARDL) model is applied, while the conventional ARDL model is used as a baseline model. In addition, the moderating effect of geopolitical risk (GPR) is also tested in the association between OR and emissions. The Environmental Kuznets Curve is validated in both the long run and the short run. Moreover, OR is found to be a major driver of emissions, and positive shocks amplify emissions more than negative shocks reduce them. GPR has a negative relationship with emissions, and the impact of positive shocks in GPR is found to be greater than the impact of negative shocks in GPR. However, the interaction between OR and GPR shows that simultaneous increases in both factors exacerbate emissions, whereas the effect of negative shocks in this interaction is insignificant. Thus, asymmetry is corroborated in all investigated relationships. Moreover, the Wald tests also confirm significant asymmetric relationships. The findings suggest reducing oil dependence and adopting GPR-sensitive planning to mitigate the environmental impacts of the oil sector in line with Vision 2030 and the Sustainable Development Goals (SDGs).