Economic growth and environmental impact: Assessing the role of geothermal energy in Saudi Arabia

Abstract

This study investigates the relationship between economic growth, renewable and geothermal energy production, and carbon emissions in Saudi Arabia over an extended time horizon. In light of Saudi Vision 2030 and global commitments to SDG 7 and SDG 13, the analysis explores whether the expansion of cleaner energy sources can help decouple economic growth from environmental degradation. The study employs a time-series econometric framework, including cointegration analysis, an error correction model, and the Environmental Kuznets Curve hypothesis, using key variables such as emissions, income, renewable energy output, energy consumption, trade openness, and oil rents. The findings indicate that economic growth exerts upward pressure on emissions in the long run, while energy consumption reflects a composition effect consistent with gradual improvements in energy efficiency and cleaner energy use. The results also confirm the presence of a stable long-run equilibrium relationship among the variables, with a meaningful adjustment process toward equilibrium following short-run deviations. However, the evidence provides limited support for the Environmental Kuznets Curve, suggesting that current income levels are insufficient to reverse environmental degradation. Overall, the study highlights the importance of accelerating renewable and geothermal energy adoption, enhancing energy efficiency, and implementing targeted decarbonization strategies to achieve sustainable development.