Abstract:

The paper aims at estimating the validity of Environmental Kuznets Curves in KSA employing annual data over the period 1971 to 2013 using the Autoregressive Distributed Lagged (ARDL) bounds testing approach to cointegration proposed by Pesaran and Pesaran (1997) and Pesaran et.al, (2001) and Non- Granger Causality within the VECM framework to explores the short-run and long-run causality direction applying the F-statistics of Wald-test. The. The ADF test ensures that the variables are either I(0) or I(1) but not I(2). The ARDL results show that there is a long-run equilibrium relationship among Carbon Dioxide emission (CO2), economic growth energy consumption, and population density. The results reveal short and long run positive and significant impact of economic growth on CO2 emission, and that the long run elasticity is less than the short-run elasticity. Following the Narayan (2010) approach, where for the EKC to exist, the long-run elasticity should be less than short-run elasticity, the results provide support for the existence of EKC in KSA. The Non-Granger causality results reveal bidirectional causality between economic growth, energy consumption, population density, and CO2; economic growth and population density, energy consumption and .population density, whereas, unidirectional causality runs from CO2 to population density. The Saudi government may help establishing the Environmental Kuznets Curve relationship between air pollution and economic growth by implementing various policies to reduce the emission level. For example, imposing taxes on pollution and increasing the role of renewable and clean energy (nuclear energy) consumption and energy efficiency. Key Words: EKC Hypothesis, ARDL, Granger-Causality, VECM, Economic Growth. Pollution.

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