The Correlation among Industrial Economic Growth, Renewable Energy Provision and CO2 Emissions in Saudi Arabia

Abstract

The industrial sector remains crucial to the Saudi Arabian economy, as the country's industrial exports continue to grow, allowing for the emergence of a thriving international market. However, the effects of global warming caused by humans have become stronger due to higher emissions of gasses that contribute to global warming, carbon dioxide (CO2). These emissions hurt both industrial productivity and the economy. Given the projected population growth and the focus on environmental remediation efforts, it is important to consider the future energy resource requirements for industrial productivity. The question that arises is: what will be the impact of having a clean energy supply on the industry's economy and the environment, even though the industry itself has the potential to greatly contribute to renewable energy production? This study investigates the effect of Saudi Arabia's renewable energy supply, CO2 emissions, and trade openness on the economic growth of the industrial sector, covering the period from 1990 to 2022. The nexus offers valuable insights for policies aimed at promoting renewable energy in the industrial sector by identifying areas of priority. An autoregressive distributed lag (ARDL) analysis was used to estimate the nexus. The findings indicated that the growth of the industry sector contributes to environmental degradation, whereas international trade benefits the sector. The industrial economy experienced a slowdown due to the reduced growth of renewable energy supply. In the short-run, an increase of one unit in the industry sector is associated with a decrease of 0.88 in CO2 emissions, while in the long-run an increase of one unit industry sector, is associated with a decrease of 0.55 in CO2 emissions. The study provides new empirical evidence for the links between renewable energy supply and the industrial sector, which can influence policy regarding the use of renewable energy in Saudi Arabia's industrial sector.