Examining the linkages among electricity consumption, income and environmental pollution in Saudi Arabia: from a spectral wavelet analysis to the Granger Causality test

ABSTRACT

This study investigates the relationship among electricity consumption, per capita GDP, and CO₂ emissions for the Kingdom of Saudi Arabia. Trade openness and urbanisation are included within a multivariate approach. Using data covering the 1971–2018 period, the wavelet-coherence analysis is applied to assess the interactions amongst variables. All variables except trade openness appear highly correlated with CO₂ emissions. This is further confirmed by our causality testing procedure (i.e. the Johansen and Juselius test for cointegration and the Granger Causality test applied on a Vector Auto-Regressive model) which shows that electricity consumption, per capita income and urbanisation are crucial determinants of CO₂ emissions. Accordingly, adequate policy measures are proposed to turn the Saudi power sector towards a sustainable path.

KEYWORDS:

• CO₂ emissions
• electricity consumption
• wavelet analysis

Acknowledgments

Comments from the editor Dr Michael Brett-Crowther and the anonymous referees are gratefully acknowledged.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1. CO₂ is the source of more than 60% of the world’s greenhouse effect [101].

2. CO₂ emissions increased from 169,404 to 563,449 kilotons over the period 1980-2016 in KSA [8].

3. An exhaustive review on the renewable energy potential of KSA can be found in Alnatheer [19].

4. The Saudi government’s Vision 2030 launched in 2016 intends to restructure the economy away from its dependence on oil through the development of new industries and business sectors [21].

5. See Cifter and Ozun [102] on Turkey; Aslan et al. [33] for the United States (US); Ha et al. [103] for China, and Matar [104] for the Gulf Cooperation Council (GCC) countries.

6. Urbanisation, trade openness and GDP data are available at: https://databank.worldbank.org/source/world-development-indicators.

7. Electricity consumption data are available at: https://www.oecd-ilibrary.org/energy/data/iea-world-energy-statistics-and-balances/world-energy-balances_data-00512-en

8. CO₂ emissions from fuel combustion data are available at: https://www.oecd-ilibrary.org/energy/data/iea-co2-emissions-from-fuel-combustion-statistics/co2-emissions-by-product-and-flow_data-00430-en

9. For an input-output analysis of CO₂ emissions embodied in trade, see Su and Ang [87].