Emissions Reduction via Renewable Energy Spending in Saudi Arabia: Firm-Level Evidence

We examine how clean energy strategies under Saudi Arabia’s Vision 2030 drive environmental sustainability in fossil fuel-dependent economies, centering on climate emissions reduction as the primary objective while analyzing water efficiency gains as critical co-benefits in the Kingdom’s water-scarce context. The study analyzed data from 42 firms (2012–2023) using the Generalized Method of Moments (GMM) and Impulse Response Functions (IRFs). Our findings show that clean energy investment reduces climate-warming gas emissions by 6.3%–8.1% and water challenges by 10.2%–16.3%, while clean energy use lowers emissions by 5.4%–7.6% and water stress by 3.2%–11.4%. Policy integration amplifies outcomes, with oil-sector firms leveraging scale for renewable projects while non-oil sectors face pressures from oil price volatility. IRFs confirm sustained environmental gains from renewable adoption. The study advocates integrated policies — subsidy reallocation, low-water renewables, and oil-sector engagement — to align economic diversification with sustainability, emphasizing the need to address agricultural water inefficiencies and industrial energy intensity.