Decarbonization or dehydration? Corporate greenhouse gas reduction and industrial water stress in Saudi Arabia

A central tension in the recent water-energy nexus literature is whether corporate decarbonization in arid economies generates co-benefits for industrial water security or, conversely, intensifies water stress through the higher water intensity of low-carbon technologies—cooling-dependent renewables, post-combustion carbon capture, and electrolytic hydrogen. Saudi Arabia, where industrial firms operate under simultaneous Vision 2030 emission-reduction targets and rapidly depleting non-renewable aquifers, provides the sharpest test of this trade-off. Using an unbalanced panel of 47 Tadawul-listed firms in five resource-intensive sectors (2012 through 2024; 611 firm-year observations), this study examines whether firm-level greenhouse gas intensity reductions co-move with reductions in industrial water withdrawal intensity, conditional on sector and macro-climatic controls, using a 2-instrument two-stage least squares strategy. The analysis finds that a 1-standard-deviation reduction in firm greenhouse gas intensity is associated with a 0.21 standard-deviation reduction in industrial water withdrawal intensity, but the relationship is non-linear: the co-benefit decays and reverses for firms that meet decarbonization through water-intensive pathways (cooling-tower expansion, electrolytic hydrogen pilots), confirming the trade-off conjecture for a non-trivial sub-population. The co-benefit emerges only after 2016 and is amplified by absorptive capacity. Findings imply that single-pollutant environmental incentives can produce hidden water externalities and support a coupled greenhouse gas and water performance standard for Saudi industrial regulation.