Does Green Energy Complement Economic Growth for Achieving Environmental Sustainability? Evidence from Saudi Arabia

Abstract

This study extends previous environmental sustainability literature by investigating the joint impact of economic growth and renewable energy on reducing CO2 emissions in Saudi Arabia over the period 1990–2016. Using the fully modified ordinary least-square (FMOLS) and dynamic ordinary least-square DOLS estimators, we find that economic growth increases CO2 emissions in all estimated models. Moreover, the validity of the environmental Kuznets curve (EKC) hypothesis is only supported for CO2 emissions from liquid fuel consumption. The invalidity of the EKC hypothesis in the most commonly used models implies that economic growth alone is not sufficient to enhance environmental quality. Renewable energy is found to have a weak influence on reducing the indicators of environmental degradation. We also find that the joint impact of renewable energy consumption and economic growth on the indicators of CO2 emissions is negative and insignificant for all the estimated models, meaning that the level of renewable energy consumption in Saudi Arabia is not sufficient to moderate the negative effect of economic growth on environmental quality. Implications for policy are also discussed.