Oil Rents and Environmental Sustainability

Journal of Open Innovation: Technology, Market, and Complexity 10 (2024) 100366
Contents lists available at ScienceDirect
Journal of Open Innovation: Technology, Market,

and Complexity
journal homepage: www.sciencedirect.com/journal/journal-of-open-innovation-technology-
market-and-complexity
Oil rents and environmental sustainability: Do green technologies and

environmental technological innovation matter?
Montassar Kahia a, Anis Omri b,*
a
Department of Economics, College of Business and Economics, Qassim University, P.O. Box 6640, Buraydah 51452, Saudi Arabia
b
Department of Business Administration, College of Business and Economics, Qassim University, P.O. Box 6640, Buraydah 51452, Saudi Arabia
A R T I C L E I N F O A B S T R A C T
Keywords: Sustaining the environment is essential for Saudi Arabia, especially given the country’s high dependence on oil
Sustainable natural resource rents. While these rents have historically fueled economic growth, they have also contributed significantly to
Environment sustainable environmental degradation. Sustainable resource use and a transition from conventional to renewable energy
Green technology
sources are essential for achieving carbon neutrality and keeping the upsurge in global temperature below 2◦ C. In
Innovation policies
Sustainable development
addition, sustainable practices help to preserve ecosystems, biodiversity, and natural resources, which are
essential for the survival of all living organisms. Consequently, this study fills a significant empirical gap by
investigating the moderating effects of technological innovation, environmental innovation, and green energy
technologies in the oil rents and environmental sustainability nexus in Saudi Arabia from 1990 to 2022. Although
there are significant direct associations between oil rents and environmental sustainability, the existing literature
has not investigated empirical research on the moderating effects of technological innovation, environmental
innovation, and green energy technologies in the oil rents and environmental sustainability nexus. To do this, the
study implements the model of dynamic AutoRegressive Distributed Lag (ARDL) simulations. The results indicate
that rising oil rents, economic growth, trade, and urbanization in Saudi Arabia worsen environmental sustain
ability while increasing green energy technologies, technological innovation, and environmental innovation
enhances environmental sustainability. Interestingly, the findings of the moderating effects of technological
innovation, environmental innovation, and green energy technologies in the oil rents and environmental sus
tainability nexus show that the predicted coefficients of the multiplicative interaction terms are both positive and
statistically significant. This demonstrates that these technologies play crucial roles in mitigating the negative
effects of oil rents on environmental sustainability in Saudi Arabia. Based on the outcomes, promoting techno
logical innovation, prioritizing investments in green sources and reducing dependence on natural resource
extraction are key policy recommendations that can significantly bolster environmental sustainability in Saudi
Arabia.
1. Introduction 2024; Athari, 2024b,c; Zhang et al., 2024; Han et al., 2024; Udeagha and
Ngepah, 2023a, 2024; Udeagha and Breitenbach, 2024). A primary
Climate change is an unprecedented global challenge that requires driver of this phenomenon is the anthropogenic release of greenhouse
immediate and concerted action from all stakeholders, as emphasized by gases which have reached unprecedented levels, surpassing all previous
Goal 13 of the Sustainable Development Agenda. The pervasive impacts records in history. Without proactive and comprehensive measures, it is
of climate change are experienced globally, causing significant disrup anticipated that the global mean surface temperature will increase
tions to national economies and exerting profound effects on in throughout the 21st century, potentially exceeding 3ºC and leading to
dividuals, communities, and nations. These disruptions come with significant environmental, economic, and social consequences (Tranter,
substantial costs, both economic and social (Udeagha and Breitenbach, 2011; Yang et al., 2022; Dahiya et al., 2024; Khan et al., 2023).
2021; Huo et al., 2023; Nguyen et al., 2023; Udeagha and Mucha The oil sector is not only a crucial contributor to the income of oil-
pondwa, 2023a; Yan et al., 2023; Ibrahim et al., 2023a,b; Athari et al., exporting countries but also has significant environmental
* Corresponding author.
E-mail addresses: m.kahia@qu.edu.sa (M. Kahia), a.omri@qu.edu.sa (A. Omri).
https://doi.org/10.1016/j.joitmc.2024.100366
Available online 14 August 2024

2199-8531/© 2024 The Author(s). Published by Elsevier Ltd on behalf of Prof JinHyo Joseph Yun. This is an open access article under the CC BY license
(http://creativecommons.org/licenses/by/4.0/).
M. Kahia and A. Omri Journal of Open Innovation: Technology, Market, and Complexity 10 (2024) 100366
repercussions. The upstream segment of the industry, which encom and environmental innovation. This makes the Kingdom an ideal case
passes the exploration and production of oil, sets the stage for the for exploring the potential balance between economic growth and
midstream segment responsible for its transmission and the downstream environmental sustainability. By focusing on Saudi Arabia, this study
sector that delivers the final product to consumers. Globally, there are aims to provide information that could inform policy decisions not only
more than 40,000 oil fields, impacting approximately 6 million people within the Kingdom but also in other oil-dependent countries seeking to
who live or work near these sites (O’Callaghan-Gordo et al., 2016). achieve similar sustainability goals.
Although the methods and technologies used in oil exploration and Empirical research has extensively examined the nexus between oil
production are highly advanced, certain gaps remain that adversely rents and environmental quality, revealing a complex and multifaceted
affect the environment of the surrounding areas and, in some cases, relationship (Balsalobre-Lorente et al., 2018; Kongbuamai et al., 2020;
entire regions (Johnston et al., 2019). These environmental impacts can Shittu et al., 2021; Ulucak and Khan, 2020; Shehzad et al., 2022; Huang
be extensive and varied. Soil and water contamination is a common and Guo, 2022; Jahanger et al., 2022; Niu et al., 2023; Ibrahim et al.,
issue, resulting from the release of hazardous substances such as hy 2023c; Zhang et al., 2024; Zhou et al., 2024; Dong et al., 2024, among
drocarbons and heavy metals during the extraction processes. This others). Several investigations have shown that oil rents have a major
contamination can harm local wildlife, disrupt ecosystems, and pose detrimental effect on the quality of the environment, primarily due to
serious health risks to nearby human populations (Gržinić et al., 2023; the environmental degradation associated with oil extraction and pro
Polcyn et al., 2023). Air pollution is another significant concern, with duction. For instance, Al-Mulali et al. (2015) found that countries with
the flaring and venting of natural gas during production releasing large high oil rents tend to have increased CO2 emissions, underscoring the
quantities of greenhouse gases and other pollutants into the atmosphere. link between oil wealth and higher pollution levels. This correlation is
This contributes to global climate change and causes respiratory prob often exacerbated by weaker environmental regulations and enforce
lems and other health issues for people who are located in the vicinity of ment in oil-dependent economies, leading to unchecked industrial
oil fields (Polcyn et al., 2023). emissions and habitat destruction (Farhani and Ozturk, 2015). However,
Furthermore, the infrastructure associated with oil production, existing research also suggests potential positive outcomes under certain
including drilling rigs, pipelines, and storage facilities, often leads to conditions. Effective management and strategic investment of oil rents
habitat destruction and fragmentation. This poses a threat to biodiver can mitigate negative environmental impacts. Nasir et al. (2020) high
sity, as natural habitats are disrupted or destroyed, making it difficult for light that when oil revenues are directed toward developing
wildlife to survive and thrive (Adedoyin et al. 2020; Ahmad et al. 2023; energy-efficient technologies and renewable energy infrastructure, they
Alam 2022; Badeeb et al. 2020; Chukwudi Udeagha et al. 2023; Danish can significantly lessen greenhouse gas emissions. This technique effect,
et al. 2020; Huang, Guo 2022; Huo et al. 2023; International Energy where oil rents are used to fund cleaner technologies, is particularly
Agency (IEA) (IEA) 2021; International Renewable Energy Agency evident in countries with strong governance and clear environmental
(IRENA) (IRENA) 2021; Kahia and Jebli, 2021; Kahia et al. 2022b). The policies.
cumulative effect of these environmental issues underscores the need for Furthermore, the diversification of economies away from heavy
more stringent regulatory measures and the adoption of sustainable reliance on oil can lead to better environmental outcomes. Amri (2018)
practices within the oil industry (Okeke, 2021). demonstrates that countries investing in oil rents in other sectors, such
In this global context, Saudi Arabia is at a turning point. The as technology, agriculture, and tourism, often see improvements in
Kingdom is not only one of the world’s largest oil producers, but it also environmental quality, as these sectors generally have a lower envi
depends heavily on oil rents for its economic growth. This economic ronmental impact compared to the impact of oil extraction and pro
structure presents both challenges and opportunities for the Kingdom’s duction. The role of robust policy frameworks is critical in this context.
sustainable development goals. While dependence on oil rents has his Bhattacharyya and Hodler (2014) emphasize that countries with strong
torically contributed to environmental degradation, it also provides institutional frameworks are more successful in using oil rents for sus
Saudi Arabia with a unique opportunity to invest in sustainable tech tainable development initiatives, noting the importance of governance
nologies and practices. Saudi Arabia’s Vision 2030 initiative, which in the relationship between oil rents and environmental quality.
aims to diversify the economy and reduce oil dependency, highlights the While preceding studies have inspected the connection between oil
country’s commitment to meeting these challenges. As part of these rents and environmental quality on a global scale, they have mainly
efforts, Saudi Arabia has engaged in global endeavors, forging partner focused on the direct impact of oil rents. However, the indirect impact of
ships with numerous international entities to combat climate change oil rents, such as technological innovation, environmental innovation,
and promote environmental sustainability (Boufateh et al., 2023; and green energy, have not been studied to the same extent, especially in
Charfeddine et al., 2024; Jarraya et al., 2023; Kahia et al., 2024, 2022a, the case of Saudi Arabia. It is crucial to emphasize that performing ex
2021, 2020, 2017; Omri et al., 2022, 2024). Oil rents have traditionally periments to assess the moderating impacts of oil rents on environ
been the primary revenue stream for Saudi Arabia, given its substantial mental sustainability through these factors is of utmost importance for
oil reserves. This economic structure presents both challenges and op the following reasons: Firstly, technological innovations introduce
portunities for the Kingdom’s sustainability goals. advanced methods and technologies that significantly diminish green
While the reliance on oil rents has historically contributed to envi house gas emissions and minimize environmental degradation associ
ronmental degradation (Mahmood and Saqib, 2022; Okoye et al., 2022; ated with oil extraction and production (IEA, 2021). Secondly,
Sweidan and Elbargathi, 2022; Ibrahim, 2022; Shen et al., 2022; Akram integrating renewable energy sources, facilitated by technological ad
et al., 2023; Niu et al., 2023; Ibrahim et al., 2023c; Zhang et al., 2024; vancements, diversifies the energy mix and reduces reliance on fossil
Zhou et al., 2024; Dong et al., 2024), these oil rents can be strategically fuels, thereby lowering overall emissions and promoting cleaner energy
leveraged to drive the “technique effect,” where revenues are directed solutions (IRENA, 2021). Thirdly, environmental innovations, such as
toward investments in developing and producing energy-efficient and smart grid technologies and energy-efficient machinery, enhance
environmentally sustainable technologies (Mahmood and Saqib, 2022). resource efficiency and waste management, ensuring that energy is used
By implementing energy efficiency measures and investing in green more judiciously and reducing the environmental footprint of industrial
technologies, Saudi Arabia can make significant strides toward envi activities (Kahia and Ben Jebli, 2021; Omri et al., 2023a, 2023b, 2022,
ronmental sustainability (Omri et al., 2022, 2024). In fact, Saudi Arabia 2021; Suki et al., 2022; Huo et al., 2023; Ma et al., 2023; Omri and
was selected as the focus of this study because of its important role in Kahia, 2024).
global oil markets and its ambitious efforts to ensure a transition to This study makes several contributions to existing work. First, the
sustainability. Unlike other oil-rich economies, Saudi Arabia has made environmental consequences of oil rents are subject to debate, and the
an explicit commitment to leverage its oil wealth to drive technological discussion has generated more controversy than clarity. The
2
controversial pieces of evidence have motivated the inspection of the energy technologies, technological and environmental innovations can
influence of oil rents on environmental sustainability in several studies. mitigate these effects.
Various samples and newly developed methodologies have been Third, the insights gained from this study can provide valuable
employed. In addition, prior studies on the relationship between oil knowledge for developing effective environmental sustainability stra
rents and the environment mainly examine the immediate impact of oil tegies in other oil-rich nations. Finally, prior research on the association
rents on environmental sustainability. There has been less focus on the between oil rents and the environment at a global level has often utilized
moderating impacts that are emerging, particularly in Saudi Arabia, other cointegration methods and the basic ARDL model proposed by
through the pathways of environmental innovation, green technologies, Pesaran et al. (2001) that solely examine the short and long-term con
and technical innovation. In fact, this study is critical because it nections among the factors being studied. This study contributes to the
uniquely examines the moderating effects of technological innovation, existing body of research by employing a sophisticated econometric
environmental innovation and green energy technologies on the rela technique, namely a novel dynamic model of ARDL simulations imple
tionship between oil rents and environmental sustainability. Unlike mented by Jordan and Philips (2018), to address the limitations and
previous research that often treats these variables in isolation, this study issues associated with the basic ARDL methodology. Although there are
integrates them into a comprehensive model adapted to the specific significant direct associations between oil rents and environmental
economic and environmental context of the studied country. This sustainability, the existing literature has not investigated empirical
approach not only fills a critical gap in the existing literature, but also research on the moderating effects of technological innovation, envi
provides valuable information to policymakers as the country seeks to ronmental innovation, and green energy technologies in the oil rents and
achieve its ambitious vision goals, which include economic diversifica environmental sustainability nexus by implementing the model of dy
tion and sustainability. namic ARDL simulations. The novel dynamic ARDL simulations model
Second, this study focuses on the case of Saudi Arabia, a particularly effectively addresses the challenges and limitations in interpreting the
important country for study due to its status as one of the largest results of the simple ARDL technique. It achieves this by automatic
pollution emitters in the world and its significant oil reserves within the simulation and plotting graphs to forecast both negative and positive
Gulf Cooperation Council region. Saudi Arabia’s unique position makes variations in the factors. Additionally, it examines the short- and
it a crucial subject in understanding the environmental impacts of long-term interactions among the considered variables. Consequently,
extensive fossil fuel extraction and utilization. While Saudi Arabia’s oil the application of this distinctive methodology in this research yields
wealth has always been the engine of economic growth, it has also reliable and unbiased outcomes.
contributed significantly to environmental degradation, high levels of The structure of this study is as follows: A review of relevant research
greenhouse gas emissions and environmental disturbances. As global is given in Section 2. The data and methods of the study are explained in
efforts to combat climate change intensify, it becomes critical to explore Section 3. The findings and analysis are presented in Section 4. The
how Saudi Arabia can make the transition to sustainable energy prac robustness check is offered in Section 5. Conclusion results, implications
tices while maintaining economic stability, as emphasized by Goal 13 of for policy, limitations and directions for future studies are given in
the Sustainable Development Agenda. This study addresses the issue of Section 6.
balancing economic dependence on oil rents and the need for environ
mental sustainability in Saudi Arabia – a challenge shared by other oil- 2. Literature review
dependent countries but particularly crucial in the context of Saudi
Arabia’s Vision 2030 initiative. In fact, the following research questions This part is divided into three subsections. The initial part explores
are posed to guide this investigation: (i) how oil rents impact environ the theoretical foundation of the link between oil rents and environ
mental sustainability in Saudi Arabia?, (ii) what role do technological mental sustainability. The subsequent part details this relationship. The
innovation, environmental innovation, and green energy technologies final part summarizes the gaps identified in the existing literature.
play in mitigating the harmful effects of oil rents on environmental
sustainability?, and (iii) can Saudi Arabia leverage these innovations
2.1. Theoretical underpinning
and green technologies to achieve the balance between economic
expansion in the country and environmental sustainability?
The association between oil rents and environmental sustainability is
In addition, to further clarify the research problem, Fig. 1 provides a
critically analyzed through different theoretical perspectives that high
visual representation of the environmental impacts associated with
light the complex interactions between natural resource exploitation
Saudi Arabia’s oil rents, highlighting potential ways in which green
and sustainable development. One of the fundamental theories is the
Fig. 1. Graphical representation of environmental impacts and mitigation pathways.
3
“resource curse”, which postulates that countries rich in natural re illustrating how open innovation serves as a crucial driver for companies
sources, such as oil, often suffer adverse economic outcomes and envi looking to innovate in ways that improve environmental sustainability.
ronmental degradation due to governance problems and excessive The importance of open innovation is also highlighted by Randhawa
economic dependence on extractive industries (Auty, 1993). This phe et al. (2021), who, through a bibliometric review, identify emerging
nomenon is explored in more detail in the context of environmental themes and research communities focused on the intersection of open
sustainability, where intensive oil extraction and consumption are innovation and environmental advances. Their work shows that envi
linked to significant ecological impacts, including pollution and habitat ronmental innovation is becoming a an increasingly important theme in
destruction (Sachs and Warner, 2001). the broader discourse on open innovation.
Another relevant theoretical framework is the Kuznets environ A study conducted by Shehzad et al. (2022) provided proof sup
mental curve (EKC), proposed by Grossman and Krueger (1995), which porting the positive impact of resource rents on the environment while
suggests an inverted u-relationship between economic development and also highlighting the harmful effect of globalization on the environment
environmental degradation. According to this theory, the environmental in Algeria. Additionally, a non-linear association was seen between
impact is worsened to a certain extent as a nation develops and in ecological footprint and economic growth, taking the form of an
dustrializes, Then it improves as economic growth leads to greater inverted “N” shape. In a study conducted between 1985 and 2017,
environmental awareness and cleaner technologies. However, for Alfalih and Hadj (2022) examined the impact of natural resource rents
countries that depend on oil rents, this model often does not hold up and financialization on environmental sustainability in Saudi Arabia.
without solid governance and reinvestment strategies aimed at sus The findings exposed a positive link between these factors, signifying
tainability (Van der Ploeg, 2011). their vital contribution to improving environmental sustainability in the
In fact, the adoption of legislation to mitigate the adverse effects of country. In another study, He et al. (2022) conducted an investigation
oil production is essential to reconcile oil rents with sustainable prac spanning the years 1971–2018 in China. The findings revealed that both
tices. In order to mitigate and overcome the environmental effects of oil oil rents and renewable energy sources played a significant role in
extraction, academics such as Stiglitz (2007) advocate the strategic use mitigating greenhouse gas (GHG) emissions. Nevertheless, the expan
of oil rents to support renewable energy projects, Environmental resto sion of the economy and the utilization of natural resources have led to a
ration programs and the creation of sustainable infrastructure. These significant rise in greenhouse gas emissions.
perspectives, which call for a paradigm shift towards sustainability in Notably, natural resource rents can potentially result in adverse
resource-rich environments, Highlight the need for solid legislative environmental consequences. In this context, utilizing the Environ
frameworks and governance mechanisms to manage oil rents in a mental Kuznets Curve (EKC) hypothesis as a foundation, Huang and Guo
manner consistent with long-term sustainability objectives. (2022) posited that during the initial phase of economic development,
natural resources may be exploited and subsequently result in envi
2.2. Empirical literature review ronmental pollution. Extending the scope of analysis of resource rents’
impacts, research has incorporated broader economic and social factors.
The empirical work examining the relationship between oil rents and This approach recognizes that the effects of natural resource use go
environmental sustainability has grown considerably, showing varying beyond immediate environmental outcomes to influence broader eco
impacts and results depending on geographical and economic contexts. nomic systems and social structures. Studies are systematically exam
A substantial number of academic studies have thoroughly examined ining the correlation between resource rents and economic growth,
and explored the relationship between revenue from natural resources renewable energy, technological innovation and social governance, and
and environmental pollutant emissions. For example, Balsalobre-Lor other pertinent factors, assessing their collective influence on sustain
ente et al. (2018) provided empirical proof supporting a negative cor ability outcomes. In this context, the study of Saliba et al. (2022)
relation between CO₂ emissions and natural resources in five European examined the impact of remittances and renewable energy on CO₂
Union economies from 1995 to 2016. Similarly, Kongbuamai et al. emissions in China from 1990 to 2019, including the influence of tech
(2020) corroborated this correlation within the context of the ASEAN nological innovation, globalization, and economic growth. The ARDL
countries throughout the period spanning from 1995 to 2016. In addi analysis revealed that economic growth has a positive impact on CO₂
tion, Kwakwa et al. (2020); Mahmood (2022); Ministry of Energy emissions, but renewable energy, remittances, and globalization have a
(2022); OECD (2023); OECD (2023); Omri, Jabeur (2024); Omri et al. mitigating effect on CO₂ emissions. Finally, the frequency domain
(2022); Onifade et al. (2021); Saline Water Conversion Corporation causation technique proved that globalization, renewable energy, eco
(2021); Saudi Arabian General Investment Authority (2023); Saudi nomic growth, technical innovation, and remittances have the ability to
Aramco (2022), as well as Danish et al. (2020), provided evidence of the forecast long-term CO₂ emissions.
detrimental influence of resource rents on the ecological footprint Moreover, Özbay et al. (2022) studied how CO₂ emissions were
among BRICS economies. Some research has examined the relationship linked to rapid urbanization, globalization, hydroelectricity, and eco
between pollution emissions and coal rents in BRICS countries. Ade nomic growth in China. This link was evaluated using
doyin et al. (2020a) conducted a study that examined the economics of quantile-on-quantile (QQ) and quantile regression (QR) methods. Ac
the BRICS economies from 1990 to 2014. The findings indicated that the cording to the QQ results, CO₂ emissions in China are caused by GDP,
presence of coal rents and the utilization of renewable energy sources urbanization, and globalization in all quantiles (0.1–0.95), but hydro
were associated with a decrease in carbon emissions, with the imposi electricity use reduces these emissions in all quantiles (0.1–0.985). The
tion of carbon damage charges having a beneficial impact on the results of the QQ regression estimates were likewise confirmed by the
reduction of CO₂ emissions. Literature also increasingly highlights the QR results. The work of Pan et al. (2022) examined the influence of
central role of open innovation in promoting environmental innovation nuclear energy on CO₂ emissions in the top nuclear power consumers.
to achieve sustainability objectives. In this context, Skordoulis et al. The outcomes indicated that nuclear energy reduces environmental
(2020) provide evidence that open innovation enhances environmental deterioration in the U.S., France, Russia, South Korea, Canada, Ukraine,
innovation. Likewise, Chesbrough and Brunswicker (2021) discussed Germany, and Sweden in most quantiles. Further, nuclear energy con
the growing adoption of open innovation practices in large companies, sumption (NUC) harms the environment, particularly in Spain and
highlighting how these practices can be harnessed to drive environ China.
mental innovation. The study highlights the importance of carefully Likewise, in five of the top carbon-emitting African nations, Shen
managing the risks associated with open innovation while maximizing et al. (2022) analyzed the effects of natural resource dependence,
its potential to generate sustainable solutions. Similarly, Rauter et al. renewable energy, urbanization, technological advancements, and
(2019) explore the development of sustainable business models, structural transition on environmental pollution as measured by carbon
4
emissions, ecological footprints, and PM2.5 air pollution between 1990 innovation (TEC), nonrenewable energy (NREN), nuclear energy (NUC),
and 2019. Based on the observed negative signals, the major empirical service-value added (SERV), and urbanization (URB). The results
results demonstrated that technological innovation, structural trans demonstrated that NREN, URB, and TEC are responsible for causing
formation, and renewable energy prevent environmental pollutants carbon emissions. In contrast, REN, NUC, and SERV help to reduce
from rising. These findings imply that Africa is on the right track toward carbon emissions.
environmental sustainability. Conversely, the surge of pollution is Further, Yan et al. (2023) analyzed the environmental effects of
amplified by urbanization and resource dependence. Similarly, Ibrahim eco-digitalization and green funding in selected Middle Eastern and
(2022) looked at the tripartite impacts of trade openness, resource North African nations from 1995 to 2019. In the empirical model,
reliance, and energy use on carbon neutrality in G20 nations between multinational corporations, renewable and nonrenewable energy, eco
2001 and 2019. The findings demonstrate that whereas renewable en nomic growth, and population expansion are STIRPAT-based variables.
ergy, gas rentals, and exports reduce carbon emissions, nonrenewable The results confirmed that eco-digitalization, green financing, and
energy, oil rents, coal rents, and imports cause a spike in carbon emis renewable energy push the sustainable environment agenda. However,
sions. Significant carbon emissions are also encouraged by trade open nonrenewable energy, economic expansion, and population increase
ness, total energy use, and total rents from natural resources. hinder the promotion of sustainability. Likewise, Niu et al. (2023)
In selected resource-dependent African nations, Omokanmi et al. examined the asymmetric effects of natural resource dependence and
(2022) examined the relationship between natural resources, pollution financial development on environmental sustainability in Emerging
in the environment, and longevity between 1980 and 2019, taking into Seven (E7) countries from 1995 to 2019 with the intervention of green
account the influence of income level as a mediating factor. The results policies such as green energy, technology, and finance. The findings
of the empirical analysis show that pollution and the use of natural re suggest that natural resources harm economies and green policies drive
sources have a statistically significant detrimental effect on longevity. the sustainability agenda, while financial development supports or
Additionally, income greatly increases longevity, and its relationship hinders it.
with natural resources mitigates the negative impacts of these resources In 54 African nations from 1996 to 2019, Zhou et al. (2023) exam
on longevity. In another study, Udeagha and Muchapondwa (2022) ined the tripartite effects of renewable and nonrenewable energy, trade
proved that environmental quality in South Africa is negatively openness, and institutions on sustainable environment. The findings
impacted by energy intensity, economic complexity, non-renewable showed that renewable energy improves sustainability while NRE and
energy usage, and trade openness. Conversely, technological innova TO harm it. The unconditional effects of institutions drive sustainability,
tion and the usage of renewable energy sources improve environmental with the institution-NRE-TO relationship hampering sustainability.
quality. Inverted U-shaped EKC is supported by economic growth and its square.
The work of Udeagha and Ngepah (2022a) implemented the dynamic Further, Ibrahim et al. (2023b) examined the contributions of popula
autoregressive distributed lag (ARDL) simulation framework to revisit tion change, technology development, and energy transition to the G7
the link between South Africa’s trade openness and environmental paths to environmental sustainability as measured by CO₂ emissions per
quality from 1960 to 2020. Although trade openness may be advanta person between 2000 and 2019. Based on the direct and indirect effects
geous for the environment in the short term, the results showed that it of the economic growth components, the findings demonstrated the
worsens environmental quality over time. Environmental degradation is existence of EKC. The direction of impact of the population mobility
caused by energy use, foreign direct investment, and added industrial indices on PCCO2 varies. PCCO2 is positively predicted by nonrenew
value; however, technological innovation enhances the state of the able energy, imports of information computer technology (ICT), and
environment. Udeagha and Ngepah (2022b) examined the impacts on mobile cellular subscriptions; exports of ICT and renewable energy
South Africa’s environmental quality of various levels of renewable and moderate the rise in PCCO2.
non-renewable energy sources. The findings verified that long-term CO₂ In ten top nations that rely heavily on natural resources, Ibrahim
emissions are reduced by hydroelectricity and nuclear energy con et al. (2023c) examined the effects of natural resource vectoring—oil,
sumption; CO₂ emissions are increased by the scale effect while they are coal, and gases—on CO₂ emissions between 1995 and 2019. The model
improved by the technique effect; and environmental quality is wors considers the relevant roles of green financing, renewable energy,
ened by the use of coal, oil, and natural gas. structural change, and technological advancements. The findings
The work of Udeagha and Ngepah (2022c) confirmed that green demonstrate that natural resources lead to the rise in CO₂ emissions. In
technology innovation has a crucial role in influencing environmental contrast, structural change, green financing, renewable energy, and
sustainability by enhancing its sustainability in both the short and long technology all show moderating effects. In the context of technological
term in South Africa. Similarly, Udeagha and Ngepah (2022d) assessed innovation, foreign direct investment, and renewable energy, Zou et al.
the asymmetric effects of technological innovation on South Africa’s (2023) examined the ecological implications of structural trans
carbon dioxide (CO₂) emissions. The results demonstrate that technical formation and population mobility. Using sophisticated estimators, the
innovation contributes to the short- and long-term reduction of CO₂ empirical data focuses on the five largest emitters in Africa between
emissions, and that expanding trade openness has a significant negative 1990 and 2019. According to the findings, the population in rural and
impact on the environment in the long run, even though it has urban areas, the manufacturing and agriculture sectors all contribute to
short-term benefits. CO₂ emissions. Conversely, technical innovation has moderating effects
In the same vein, Akram et al. (2023) investigated the degree to on the service sector, foreign direct investment, and renewable energy.
which key variables such as reliance on natural resources, The work of Shen et al. (2023) evaluated the effects of green
eco-innovation, and the use of green energy (such as biofuel and hydrogen on the environment between 1995 and 2019 in the top seven
renewable energy) contribute to or impede progress toward reaching a nations that use hydrogen. The STIRPAT framework model considers the
carbon-neutral environment in the G7 countries. The study examined functions of digitalization, energy efficiency, environmental technolo
the supplementary functions of carbon tax, environmental policy gies, green financing, and energy-related technologies. According to the
strictness, and financial development in longitudinal data spanning from study, the top seven hydrogen-consuming nations support environ
1997 to 2019. The empirical evidence demonstrated that the imple mental sustainability through green financing, energy efficiency, digi
mentation of green energy, carbon tax, and environmental policy aids in talization, environmental-related technology, green hydrogen, and
achieving carbon neutrality by decreasing the amount of CO₂ emissions. structural change. Reliance on natural resources and urbanization in
The work of Ibrahim et al. (2023a) examined the significant influence of creases CO₂ emissions, which worsen environmental issues. Similarly,
renewable energy in promoting sustainable development in the BRICS Zhang et al. (2023) examined how technological innovation shocks
countries by incorporating the functional roles of technological affected Chinese environmental sustainability from 1990 to 2019. The
5
Table 1
Designation of variables and data sources.
Series Designation Symbol Sources
Environmental sustainability Proxied by environmental performance index ES World Bank (2023)

Economic growth Proxied in GDP per capita US$ (2015) GDPp World Bank (2023)
Green energy technologies Proxied by clean energy share GE World Bank (2023)
Trade Proxied as the sum of both export and import divided by population that is total trade per capita Tr World Bank (2023)
Technological innovation Total patent applications in number for non-residents and residents TI World Bank (2023)
Urbanization Proxied as urban population percentage UR World Bank (2023)
Oil rents Oil rents percentage of GDP OR World Bank (2023)
Environmental innovation Proxied by the total number of patents in environment-related technologies EI World Bank (2023); OECD (2023)
model estimates various effects of foreign direct investment, renewable an overview of the GCC banking sector, revealing that ESG practices
and nonrenewable energy, and economic growth. Technological inno influence financial stability through a curvilinear inverted U-shaped
vation enhances environmental sustainability when positive shocks relationship. This suggests that optimal ESG investment levels are
occur, while adverse shocks limit environmental sustainability. Eco essential to maintaining stability. This concept is extended in a study by
nomic expansion and nonrenewable energy hinder environmental sus Athari et al. (2024), which examined the impact of sovereign ESG ini
tainability, whereas renewable energy and FDI promote it. tiatives on bank profitability and further highlighted the complex
In addition, Qi et al. (2023) examined the aggregated and dis interaction between financial health and sustainable practices.
aggregated environmental sustainability implications of biofuels in five In India, where green banking initiatives significantly improve
leading biofuel-abundant economies: Brazil, China, Germany, banks’ environmental performance, Gulzar et al. (2024) illustrated the
Indonesia, and the U.S. Green technological innovation, affluence, green positive results of integrating sustainability into financial strategies. In a
financing, population, and coal are examined in a STIRPAT framework broader economic context, Athari (2024b) and Athari (2024c) studied
to further understanding. The empirical findings illustrate that biofuels how economic openness, financial stability, and rigorous environmental
significantly reduce carbon emissions, enabling environmental sustain policies affect renewable energy consumption in BRICS and OECD
ability. In addition, green financing and environmental technology countries, respectively, indicating that favorable economic and political
reduce carbon emissions, while affluent population and coal increase environments are conducive to sustainability.
them. Wang et al. (2023) studied the effects of green policies vectoring, Further, exploring the role of technology and policy, Zhang et al.
energy, finance, and innovation during eco-digitalization and urbani (2024) analyzed the effects of green energy and digitization on envi
zation on CO₂ emissions, ecological footprint, and PM2.5 air pollution in ronmental sustainability in emerging economies, highlighting how
BRICS nations from 1995 to 2019. Green energy, finance, innovation, digital advances can mitigate the negative impacts of natural resource
and eco-digitalization reduce CO₂ emissions, ecological footprint, and depletion. Likewise, Han et al. (2024) focused on China, using the
PM2.5 air pollution, promoting environmental sustainability. Due to STIRPAT model to demonstrate that eco-digitization and green finance
their polluting impacts, urbanization and affluence harm the significantly reduce the ecological footprint and CO₂ emissions. This
environment. work shows the potential of integrated technology and financial ap
The research of Udeagha and Ngepah (2023a) determined that en proaches to improve sustainability. Zhou et al. (2024) and Wang et al.
ergy consumption, foreign direct investment, trade openness, and in (2024) presented contrasting perspectives from the BRICS and African
dustrial expansion all contribute to an increase in CO₂ emissions in South regions, respectively, where natural resource rents and economic prac
Africa, but technical innovation helps to lower these emissions. Further, tices have a varying impact on environmental indicators, technological
Udeagha and Breitenbach (2023b) revealed that energy usage, trade innovation, and green policies playing a central role in mitigating
openness, added industrial value and foreign direct investment were the negative impacts. Dong et al. (2024) extended this analysis to G7
primary contributors to CO₂ emissions in South Africa. In contrast, countries, where the interaction between natural resource dependence,
technological innovation was revealed to be the country’s primary technological innovation, and environmental stringency shapes the
driver of ecological integrity. Udeagha and Ngepah (2023b) proved that sustainability landscape, highlighting the need for holistic approaches to
using green technology and renewable energy contributes positively to environmental governance. Further, Gonçalves et al. (2024) confirmed
developing a green environment. However, fiscal decentralization and that open innovation improves environmental innovation to achieve
economic expansion have caused ecological damage in the BRICS na sustainability.
tions. Udeagha and Muchapondwa (2023a), b, c, and d) confirmed the
necessity of environmental-related technology innovation and renew 2.3. Research gap in the literature
able energy to address global pollution and achieve environmental
sustainability goals in the BRICS economies. Likewise, Udeagha and The existing studies on the relationship between oil rents and envi
Ngepah (2023c), d, e, and f; (2024), Udeagha and Muchapondwa ronmental sustainability often yield mixed and sometimes contradictory
(2023b) Omri and Boubaker (2024) and Omri and Ben Jabeur (2024) results, indicating an urgent need for more focused and context-specific
revealed that the implementation of green innovation, strict environ studies. This research aims to fill a significant gap by examining this
mental policies, and increased investment in renewable energy research relationship in the unique economic and environmental context of Saudi
and development have played a significant role in the sustained decrease Arabia, a country whose dependence on oil rents has not been studied in
of CO₂ emissions. Further, Sarango-Lalangui et al. (2023) confirmed that depth regarding environmental sustainability impacts.
open innovation, driven by the key role of environmental sustainability, This study is notable for its in-depth examination of the moderating
has become a crucial factor in improving innovation performance in effects of environmental innovation, technological innovation, and
many areas, including quality, growth, efficiency, process improvement, green technologies in the context of the link between oil rents and
organizational practices, employee motivation and the development of environmental sustainability. This approach is innovative because pre
new product and service skills. vious studies in this area have relied heavily on basic econometric
Studies have determined the multidimensional impacts of environ models and have not sufficiently explored how these specific moderating
mental, social, and governance (ESG) practices in various sectors and variables can influence the dynamics between oil and environmental
regions, highlighting the complex dynamics between economic policies, performance. By integrating advanced statistical techniques, this study
sustainability measures, and financial stability. Athari (2024a) provides aims to provide a more accurate understanding of how integrating
6
innovative environmental and technological strategies can mitigate or incorporated a stochastic disturbance term to enable the estimation and
intensify the environmental impacts of oil-based economic activities. testing of hypotheses. In addition, The STIRPAT formulation permits
Furthermore, the lack of previous research focusing on these mod greater flexibility in the connection between variables than the IPAT
erators in the context of Saudi Arabia underscores the originality and model, which implies strict proportionality between the P, A, and T
potential impact of this study. The results should provide new per variables and the I factors (Charfeddine and Kahia, 2021; Yan et al.,
spectives that could significantly improve academic discourse on 2023; Dong et al., 2024).
resource dependence and sustainability. It is important to note that this The STIRPAT model, introduced by Dietz and Rosa (1997), is defined
research aims to produce actionable knowledge that could inform policy as follows:
decisions in Saudi Arabia and other regions with similar economic
It = αPβt 1 × Aβt 2 × T t 3 × πt (1)
β
structures. By describing the role of innovative practices in developing
environmental outcomes, the study could provide valuable guidance to In this regression, the period is denoted by t, the stochastic term is
policymakers who aim to promote sustainable development in resource- denoted by π t , the intercept is represented by αand the parameters to be
rich economies. analyzed are symbolized by βi , i=1,2,3. By converting the previous
equation to its logarithmic form, the model can be reformulated as
3. Data and methodology follows:
3.1. Data and model construction log It = β0 + β1 log Pt + β2 log At + β3 log Tt + ηt (2)
In this specification, the constant term is represented by β0 , the pa
This study aims to explore the effect of oil rents through the specific rameters to be investigated are indicated by βi , i=1,2,3. Further, the new
technological process by which oil rents impact environmental sus error term is represented by ηt , presumed to be independent and iden
tainability in Saudi Arabia, including factors such as technological tically distributed across observations. In this analysis, variable I refers
innovation (TI), environmental innovation (EI), and green energy to environmental sustainability (ES), A denotes the GDP per capita,
technologies (GE). This investigation uses multivariate yearly time se signifying the economic growth variable, T is the technological inno
ries data from 1990–2022. One benefit of using annual data is that it vation variable and the P variable is proxied by urbanization.
removes any seasonal variation. The variables are selected following a Nevertheless, to enhance the flexibility of this analysis, this study
detailed evaluation of diverse sources. Table 1 provides an overview of modifies Equation (2) by incorporating extra explanatory variables,
the definitions of the variables and data sources considered. including green energy technologies, trade, oil rents and environmental
Further, Table 2 presents a summary of the factors that were innovation variables. In addition, this research also expands specifica
analyzed. These variables represent the normal behavior of the data tion 2 to a multivariate scenario and assumes that it follows dynamic
series. In addition, Table 2 displays the correlation matrix, indicating the ARDL simulations (Udeagha and Muchapondwa, 2022; Udeagha and
absence of a strong association between the analyzed models. The re Ngepah, 2022b, c, and 2024; Udeagha and Breitenbach, 2023b)
sults are confirmed by implementing the variance inflation factor (VIF) Consequently, Equation (3) represents the generic form of the model
test, which indicates that all values in the VIF are less than 3, suggesting (ES), establishing the foundational model, which includes the primary
that our model is not affected by the multicollinearity problem. This factors without any multiplicative interaction terms:
study examines the multivariate time series approach using empirical
ln ESt = β0 + β1 ln ESt− 1 + β2 ln GDPPt + β3 ln ORt + β4 ln GEt + β5 ln TIt

(3)
+β6 ln EIt + β7 ln Trt + β8 ln Urt + ςt
methods. To address the issue of heteroscedasticity, the series is trans

formed into a natural logarithmic form.
In this investigation, the foundational framework for analyzing the In this equation, β0 refers to the constant term, β1;2;3;4;5;6;7;8 specifies
moderating effects of technological innovation, environmental innova the level of elasticity related to the relevant environmental factor (ES),
tion, and green energy technologies in the oil rents and environmental and ςt indicates error term. The first lag of the dependent factor
sustainability nexus is built upon the STIRPAT model developed by Dietz (ln ESt− 1 ) is incorporated to account for the dynamic impact of envi
and Rosa (1997). This framework guides the model formulation of the ronmental sustainability in the model. As previously stated, this inves
study and aids in selecting crucial variables. tigation aims to explore the effect of oil rents through the specific
The STIRPAT model is a revised version of the IPAT mathematical technological process by which oil rents impact environmental sus
identity initially developed by Ehrlich and Holdren (1971). The IPAT tainability (ES) in Saudi Arabia, including factors such as technological
identity is represented by the equation I = P × A × T, where I denotes the innovation (TI), environmental innovation (EI), and green energy
influence, P symbolizes the population, A symbolizes the level of afflu technologies (GE). To account for this effect, a multiplicative interaction
ence, and T denotes the level of technology. Dietz and Rosa (1997) term is first introduced to Equation (3) that considers both technological
intended to address the two significant limitations of the IPAT Approach innovation (TI) and oil rents (OR). The Equation (4) provided is as fol
by developing the STIRPAT model. In their study, Dietz and Rosa (1997) lows:
ln ESt = β0 + β1 ln ESt− 1 + β2 ln GDPpt + β3 ln ORt + β4 ln(ORt × TIt ) + β5 ln GEt

(4)
+β6 ln TIt + β7 ln EIt + β8 ln Trt + β9 ln Urt + ςt
7
Table 2
Descriptive statistics and pairwise correlations.
ES GDPp GE Tr TI Ur OR EI
Mean 53.30 18492.65 0.0187 71.049 1427.60 81.117 34.118 209.770

Median 51.00 18295.45 0.010 68.166 873.00 81.204 31.342 39.991
Max 68.63 21138.65 0.060 96.102 3979.00 84.729 54.085 925.028
Min 37.90 15561.48 0.010 49.713 455.00 76.583 15.978 0.200
Std. Dev. 7.46 1356.742 0.015 11.732 1191.12 2.262 10.258 301.887
J-B stat(Prob) 3.996(0.135) 0.840(0.656) 0.960(0.523) 1.660(0.435) 1.365(0.480) 1.514(0.468) 1.998(0.368) 1.252(0.510)
VIF - 2.234575 1.529960 2.55365 1.881499 2.080864 1.651231 2.21080
ES 1
GDPp − 0.353 1
GE 0.497 0.3592 1
Tr − 0.088 − 0.094 − 0.426 1
TI 0.070 0.629 0.505 − 0.554 1
Ur 0.239 0.509 0.129 − 0.042 0.746 1
OR − 0.024 − 0.283 − 0.429 0.771 − 0.645 − 0.162 1
EI 0.047 0.659 0.600 − 0.415 0.735 0.717 − 0.491 1
Note: VIF refers to the Variance Inflation Factor. VIF values below 3 indicate no multicollinearity, 3–5 moderate multicollinearity, and 5 or above severe multi
collinearity in the predictive model.
Several often-employed unit root tests are the Kwiatkowski-Phillips-

Schmidt-Shin (KPSS) test, the Phillips-Perron (PP) test, the Augmented
Given that OR influences energy production, results in fluctuating Dickey-Fuller (ADF) test, the Elliott-Rothenberg-Stock (ERS) test, the
energy prices, leads to increased energy use, and significantly worsens Dickey Fuller-GLS (DFGLS) test, and the Ng-Perron test. The ADF test is
the quality of the environment, TI will act as a mediating (moderating) commonly applied to determine if a time series has a unit root. It relies
component in the connection between oil rents and environmental on the postulation of a linear trend in the data and supposes that there is
sustainability when β4 is statistically significant and positive and β3 is no heteroscedasticity, serial correlation, or structural breaks present in
statistically significant and negative. Consequently, the existence of a the data. This test is frequently implemented but lacks robustness. The
moderating effect of TI in the oil rents-environmental sustainability ERS test is a revised variant of the ADF test employed to examine the
nexus can be confirmed if the multiplicative term of interaction in existence of unit roots when structural breaks are present. The Ng-
Equation (4) is statistically significant. Perron test is an adjusted version of the ADF test that considers the
Similarly, the subsequent equation can be applied to examine the possibility of several unit roots. As a supplementary tool to the ADF test,
moderating impact of environmental innovation (EI) on the relationship the KPSS test checks time series for trend stationarity. The DFGLS test is
between oil rents and environmental sustainability: widely regarded as a robust test for detecting unit roots due to its ability
ln ESt = β0 + β1 ln ESt− 1 + β2 ln GDPpt + β3 ln ORt + β4 ln(ORt × EIt ) + β5 ln GEt

(5)
to take into account temporal aggregation in the data, deterministic

trends, and structural breaks. The PP test, which is considered an ADF
In the same line of thought, this study examines how the moderating test extension, is also considered an effective unit root test because it can
effect of green energy technologies (GE) influences the relationship handle more generic types of non-linear data, including temporal ag
between oil rents and environmental sustainability. To achieve this gregation, structural breaks, and deterministic trends. Hence, PP and
impact, the foundational model was augmented by incorporating the DF-GLS tests are regarded as being more effective and more resilient
multiplicative term of interaction between green energy technologies than other unit root tests, including ERS Point Optimal, KPSS, Ng-Perron
(GE) and oil rents (OR) in the following manner: test, ADF, and KPSS test, especially when dealing with time series data
ln ESt = β0 + β1 ln ESt− 1 + β2 ln GDPpt + β3 ln ORt + β4 ln(ORt × GEt ) + β5 ln GEt

(6)
3.2. Stationarity check that could exhibit heteroscedasticity, serial correlation, or structural
breaks (Sun et al., 2024). Prior to employing the innovative dynamic
It is crucial to determine the integrated order of the basic factors ARDL simulations regression, the Phillips-Perron (PP) test, the
through a unit root test before running a cointegration test. The number Kwiatkowski-Phillips-Schmidt-Shin (KPSS) test, the Augmented
of differences required for a time series to become stationary is referred Dickey-Fuller (ADF), test as well as the Dickey Fuller-GLS (DFGLS) test
to as the order of integration. Several unit root tests are applied to the are performed to explore the integration order of the underlying factors.
data to determine if a time series is non-stationary if it has a unit root.
8
3.3. Cointegration test ∑q ∑q ∑q

ln ESt = θ0 + i=1
θ1i ln ESt− i + i=0
θ2i ln GDPp(t− i) + i=0
θ3i ln ORt− i
There are numerous methods for attaining cointegration among a ∑q
+ i=0 θ4i ln GEt− i +
∑q
θ5i ln TIt− i +
∑q
θ6i ln EIt− i +
∑q
θ7i ln Trt− i
series. ARDL is predominantly favored over other approaches due to its ∑q
i=0 i=0 i=0
greater flexibility and dynamic nature. The ARDL, implemented by + i=0 θ8i ln Urt− i + υt
Pesaran et al. (2001); Saudi Electricity Company (2022); Saudi Green (8)
Initiative (2021); Saudi Investment Recycling Company (2020); Saudi
Water Partnership Company (2022); Sharif et al. (2024); Tiba and Fri The factors in Equation (8) have a long-run variance represented by
kha (2019); Udeagha and Breitenbach (2023c); Udeagha and Brei θ. The Schwarz Bayesian Information Criterion (SBIC) determines the
tenbach (2023d); Udeagha and Muchapondwa (2022); Udeagha and appropriate lags.
Ngepah (2023f); Ulucak et al. (2020); Vision, (2030) (2023); Zhang et al. The following equation presents the short-run error correction
model:
∑q ∑q ∑q
Δ ln ESt = θ0 + ϕ Δ ln ESt− i +
i=1 1i
ϕ Δ ln GDPp(t− i) +
i=0 2i
ϕ Δ ln ORt− i
i=0 3i
∑q ∑q ∑q ∑q
+ i=0 ϕ4i Δ ln GEt− i + ϕ Δ ln TIt− i +
i=0 5i
ϕ Δ ln EIt− i +
i=0 6i
ϕ Δ ln Trt−
i=0 7i
i (9)
∑q
+ i=0 ϕ8i Δ ln Urt− i + φECTt− i + μt
(2021) enables the inclusion of either mixed or same-order integration.

In addition, the ability to concurrently assess the short- and long-range
outcomes for the connections among the series is one advantage of ARDL where ϕ captures the short-term fluctuations of the factors while the
over the conventional technique of econometrics. One application of the error correction term (ECT) represents the speed at which disequilib
approach is determining the existence of long-range co-movement be rium is adjusted.
tween the series. To demonstrate, the study utilizes Equation (3), which This study implements an extensive set of diagnostic procedures to
is the basic model that does not include terms for multiplicative in assess the stability and constancy of the specification. The existence of
teractions. The models with multiplicative interaction terms are the heteroscedasticity is determined by applying the Harvey and Breusch-
primary focus of the following illustrations. As in Pesaran et al. (2001), Pagan-Godfrey tests. The model’s serial correlations are inspected by
this study introduces the ARDL bounds testing methodology as follows: implementing the Breusch-Godfrey LM test. In addition, the normality is
Δ ln ESt = β0 + β1 ln ESt− i + β2 ln GDPp(t− 1) + β3 ln ORt− i + β4 ln GEt− i + β5 ln TIt− i

∑q ∑q
+β6 ln EIt− i + β7 ln Trt− i + β8 ln Urt− i + γ Δ ln ESt− i +
i=1 1i
γ Δ ln GDPp(t− i)
i=0 2i
∑q ∑q ∑q ∑q (7)
+ i=0 γ3i Δ ln ORt− i + γ Δ ln GEt− i +
i=0 4i
γ Δ ln TIt− i +
i=0 5i
γ Δ ln EIt− i
i=0 6i
∑q ∑q
+ i=0 γ7i Δ ln Trt− i + γ Δ ln Urt− i + τt
i=0 8i
evaluated using the Jarque-Bera Test. Further, the correct specification

of the model is assessed by employing the Ramsey RESET test. Structural
where τt denotes the white noise and Δ refers to the first difference. stability is assessed by employing the CUSUMSQ and CUSUM methods,
Further, β and γ are the long- and short-run parameters to be computed, which include calculating the cumulative sum of squares of recursive
respectively, and t-i is the optimal lag as given by Schwarz’s Bayesian residuals and the cumulative sum of recursive residuals, respectively.
Information Criterion (SBIC). A cointegration of the factors will provide
estimates of the ARDL specification for both the long and short term. 3.4. Dynamic ARDL simulations
The alternative hypothesis
(H1: β1 ∕= β2 ∕
= β3 ∕
= β4 ∕= β5 ∕
= β6 ∕= β7 ∕ = 0) is opposed by the null
= β8 ∕ The ARDL method is widely used in environmental, economic, and
hypothesis (H0: β1 = β2 = β3 = β4 = β5 = β6 = β7 = β8 = 0). How energy studies because of its statistical advantages. The ARDL technique
ever, the acceptance or rejection of the null hypothesis is contingent is resilient, appropriate, and well-suited for small-sample situations
upon the computed F-statistic value. If the calculated F-statistic value is (Pesaran et al., 2001). According to Langnel and Babington (2020), the
greater than the upper bound, then the null assumption is rejected and it ARDL method does not have issues with autocorrelation and can over
is concluded that the factors are cointegrated. If the computed F-statistic come problems with endogeneity by selecting the appropriate lag
is lower than the lower bound, the null assumption is supported with the length. In addition, the ARDL method can be applied regardless of
assumption that the factors are not cointegrated. Moreover, if the whether the variables being studied are stationary at the first difference I
derived F-statistic value lies within the range of the lower and upper (1) or at level I(0). This method additionally generates the error
bounds, the ARDL bounds test does not provide a conclusive result. The correction model’s long- and short-run cointegration coefficients in a
long-run autoregressive distributed lag (ARDL) model is expressed as single specification.
follows: Conversely, the dynamic ARDL simulations framework for time se
ries data has become more prevalent in energy and sustainability eco
nomics. This is primarily because it resolves the difficulties in analyzing
assessments acquired by the conventional ARDL technique for exploring
9
the long- and short-term parameters of the factors under consideration

(Jordan and Philips, 2018). To extract valuable insights from time-series Finally, applying the novel model of dynamic ARDL simulations,
models, which may include coefficients that have meanings that are not Equation (6) is rewritten as follows to examine how the moderating
immediately obvious or “hidden” (Jordan and Philips, 2018), the tech effect of green energy technologies (GE) influences the link between oil
niques of dynamic simulations are becoming increasingly popular due to rents and environmental sustainability:
their advantageous characteristics. While accounting for other factors,
Δ ln ESt = π 0 + α0 ln ESt− 1 + ϕ1 Δ ln GDPpt + β1 ln GDPp(t− 1) + ϕ2 Δ ln ORt + β2 ln ORt− 1

+ϕ3 Δ ln GEt + β3 ln GEt− 1 + ϕ4 Δ ln TIt + β4 ln TIt− 1 + ϕ5 Δ ln EIt + β5 ln EIt− 1
(13)
+ϕ6 Δ ln Trt + β6 ln Trt− 1 + ϕ7 Δ ln Urt + β7 ln Urt− 1 + ϕ8 Δ ln(ORt × GEt )
+β8 ln(ORt− 1 × GEt− 1 ) + ηETCt− 1 + ξt
the approach of dynamic ARDL simulations can automatically plot,

simulate, and estimate the real negative and positive shocks in the Equations (10), (11), (12), and (13) are implemented and analyzed in
dependent variable and regressors. Using the dynamic ARDL simulations the investigation.
approach requires first-difference stationary-dependent variable guar
anteeing. Furthermore, regressors in the model cannot have an inte 4. Empirical results and discussion
gration order higher than I (1). The adoption of this innovative
methodology in this investigation ensures that the outcomes are both The stationarity characteristics of all the variables are studied in this
accurate and unbiased. investigation. This inquiry utilizes four tests of stationarity, namely PP,
In this study, the algorithm for the dynamic ARDL error correction ADF, KPSS, and DF-GLS, to accomplish this objective. The findings of
employs 1000 simulations based on the assumption that the parameter these tests are presented in Table 3. In fact, Table 3 demonstrates that
vector follows a multivariate normal distribution. Furthermore, this every series that exhibits non-stationarity at the level (I(0)) achieves
study utilizes graphs to examine the real-time fluctuations of the exog stationarity at I(1) following the process of first differencing. This
enous factors and their impact on the endogenous factor. This study demonstrates that all studied factors exhibit integration of order 1 (I
provides the innovative dynamic ARDL simulations model as follows, (1)). In addition, Table 4 presents the outcomes of several tests used to
using Equation (3) as the baseline specification and in accordance with define the optimal number of lags. The Schwarz Information Criterion
Jordan and Philips (2018): (SIC), Akaike Information Criterion (SIC), and Hannan-Quinn (HQ)

+ϕ3 Δ ln GEt + β3 ln GEt− 1 + ϕ4 Δ ln TIt + β4 ln TIt− 1 + ϕ5 Δ ln EIt + β5 ln EIt− 1 + ϕ6 Δ ln Trt (10)
+β6 ln Trt− 1 + ϕ7 Δ ln Urt + β7 ln Urt− 1 + ηECTt− 1 + λt
To account for the moderating effect of technological innovation (TI) techniques have often been used in empirical investigations to deter
in the oil rents and environmental sustainability nexus in the novel mine suitable (optimal) lag lengths. This research employs the SIC
model for dynamic ARDL simulations, Equation (4) is adjusted as technique for lag selection based on its improved performance (Udeagha
follows: and Muchapondwa, 2022). The lag one process is considered the most

(11)
+ϕ6 Δ ln Trt + β6 ln Trt− 1 + ϕ7 Δ ln Urt + β7 ln Urt− 1 + ϕ8 Δ ln(ORt × TIt )
+β8 ln(ORt− 1 × TIt− 1 ) + ηETCt− 1 + ξt
In the same vein, by rewriting Equation (5) in the novel model of suitable for the inquiry since it presents the lowest outcome compared to
dynamic ARDL simulations, the study may examine the moderating ef other procedures.
fect of environmental innovation (EI) in the link between oil rents and After confirming the ideal lag length for the model, Table 5 sum
environmental sustainability: marizes the output of the cointegration test and the diagnostic statistic

(12)
+ϕ6 Δ ln Trt + β6 ln Trt− 1 + ϕ7 Δ ln Urt + β7 ln Urt− 1 + ϕ8 Δ ln(ORt × EIt )
+β8 ln(ORt− 1 × EIt− 1 ) + ηETCt− 1 + ξt
10
Table 3
Results of unit root tests.
Variables PP ADF KPSSLM-Stat DF-GLST-Stat
Level I(0) Δ Level I(0) Δ Level I(0) Δ Level I(0) Δ
LnES − 1.575(0.780) − 8.174*(0.000) − 1.412(0.502) − 9.242*(0.000) 0.088 0.133*** − 1.588* − 0.620*

LnGDPp − 1.858(0.652) − 5.372*(0.000) − 1.049(0.723) − 4.948*(0.000) 0.065 0.154** − 1.846* − 0.710*
LnGE − 0.473(0.979) − 8.577*(0.000) − 1.527(0.797) − 5.724*(0.000) 0.187** 0.500* − 1.709* − 0.631*
LnTr − 1.474(0.817) − 4.380*(0.008) − 1.474(0.817) − 4.365*(0.008) 0.136*** 0.250* − 1.540* − 0.579*
LnTI − 1.318(0.865) − 4.318*(0.009) − 1.318(0.865) − 4.405*(0.007) 0.153** 0.352* − 1.420* − 0.519*
LnUr − 1.894(0.615) − 18.051*(0.000) − 1.241(0.899) − 4.680*(0.003) 0.190** 0.166** − 1.949* − 0.883*
LnOR − 2.304(0.419) − 11.914*(0.000) − 2.304(0.419) − 6.030*(0.000) 0.154** 0.141*** − 2.322* − 0.376*
LnEI − 1.130(0.851) − 14.188(0.000) − 1.481(0.811) − 5.082*(0.001) 0.147** 0.183** − 1.100* − 0.847*
Note: *, **, and *** indicate a significance level of 1 %, 5 %, and 10 %, respectively. Δ refers to first difference.
Table 4
Results of lag length criteria.
Lag LogL LR FPE AIC SIC HQ
0 144.5801 NA 2.06e− 14 − 8.811619 − 8.441558 − 8.690989

1 377.9051 331.1710 4.25e− 19* − 19.73581* − 16.40526* − 18.65014*
2 517.3026 125.9074* 8.45e− 21 − 24.60017 − 18.30913 − 22.54944
Note: * indicates the optimal lag order selected by the criterion.
Table 5
Analysis of ARDL bound test and diagnostic tests.
Results
Bounds cointegration testing F–Bounds Test 5.595* Cointegration exists

T–Bounds Test − 3.986* Cointegration exists
Pesaran et al. (2001) ARDL Bounds test F–Bounds Test 6.786* Cointegration exists
Breusch-Godfrey LM test χ2 (.) 4.049 (0.1320) No serial correlation
Breusch-Pagan-Godfrey test χ2 (.) 14.176 (0.116) Homoskedasticity
ARCH test χ2 (.) 7.102 (0.626) Homoskedasticity
Ramsey RESET Test F-statistic (.) 1.942 (0.177) No omitted variables
Jarque-Bera Test Statistic (.) 0.101 (0.950) Normally distributed data
Note: *, **, and *** indicate a significance level of 1 %, 5 %, and 10 %, respectively.(.) refers to p-values.
tests. The results of Kripfganz and Schneider (2018) proposed increased carbon dioxide (CO2) emissions, primarily attributable to the
surface-response regression analysis for the cointegration test. Since the country’s substantial dependence on fossil fuels for energy production.
t- and F-statistics are higher than the upper bound critical values at As the economy expands, driven by sectors such as oil and gas, industrial
separate levels of significance (5 % and 1 %), this study may reject the activities, and infrastructure development, the demand for energy rises
null assumption of no cointegration. This indicates that the variables significantly. This, in turn, leads to higher levels of CO2 emissions.
under investigation are cointegrated and have a long-run association. Despite efforts under initiatives such as Vision 2030 to diversify the
Further, several diagnostic statistical tests were used to evaluate the economy and implement sustainability measures, Saudi Arabia remains
precision and accuracy of the model. The effectiveness of the model is one of the largest CO2 emitters in the world due to its high energy
evident from the test results, as it successfully meets all the screening consumption and dependence on fossil fuels. The country’s carbon
requirements. The Breusch-Godfrey LM test indicates that autocorrela intensity—CO2 emissions per unit of energy—remains high, and its shift
tion and serial correlation do not affect the proposed model. The toward renewable energy is just beginning (CCPI, 2024; KAPSARC,
Breusch-Pagan-Godfrey and ARCH evaluation also indicate that the 2024). The results are consistent with those of Murshed et al. (2021) and
regression does not exhibit heteroscedasticity. In addition, the selected Adedoyin et al. (2020b), studies which have established that economic
specification is free from any errors or inaccuracies in its specification as growth contributes to environmental deterioration in the case of South
indicated by the Ramsey RESET test. Ultimately, the adequate distri Africa and EU economies, respectively.
bution of the residuals is verified by applying the Jarque-Bera test. Further, the predicted long- and short-term parameters on oil rents
In addition, column (2) of Table 6 presents the baseline results of the are both negatively correlated and statistically significant, suggesting
direct impact of oil rents, green energy technologies, technological that a 1 % rise in oil rents in Saudi Arabia aggravates environmental
innovation, environmental innovation, as well as other additional fac sustainability by 0.197 % and 0.273 % in the short and long term,
tors (i.e., economic growth, trade, and urbanization) on environmental respectively. This is explained by the fact that oil rents in Saudi Arabia
sustainability. This is shown in Equation (10) by applying the dynamic reduce environmental sustainability by promoting heavy reliance on
ARDL simulations specification. According to the findings, the estimated fossil fuels, which significantly increases CO2 emissions. The economic
coefficients for both long-term and short-term economic growth are benefits from oil rents often lead to higher energy consumption and
statistically significant and negative. This suggests that economic industrial activities that are not environmentally sustainable. This de
expansion in Saudi Arabia results in a drop in environmental sustain pendency hinders investment in renewable energy sources and cleaner
ability by increasing the level of carbon dioxide emissions. This implies technologies. Studies have shown that oil rents exacerbate the ecological
that economic growth in Saudi Arabia has been closely linked to footprint and carbon emissions, as economic growth driven by oil
11
Table 6 (2022) and Balsalobre-Lorente et al. (2018), who confirmed the negative
Analysis of dynamic ARDL simulations. impact of resource rents on environmental degradation by enhancing
LnES (Environmental sustainability) environmental sustainability. In addition, the calculated short and
long-run parameters for green energy technologies (GE), technological
Equation Equation Equation Equation
(10) (11) (12) (13) innovation (TI), and environmental innovation (EI) are positive and
statistically significant, signifying that a 1 % rise in green energy tech
Cons 0.189** 0.127*** 0.284*** 0.260***
(0.029) (0.080) (0.055) (0.063)
nologies, technological innovation, and environmental innovation in
LnESt− 1 0.907* 0.318* 0.402* 0.187* Saudi Arabia ameliorates environmental sustainability by 0.106 %,
(0.008) (0.004) (0.003) (0.001) 0.584 %, and 0.143 %, in the short term and by 0.148 %, 0.286 %, and
LnGDPpt− 1 − 0.599** − 0.714** − 0.604** − 0.367*** 0.163 % in the long term, respectively.
(0.024) (0.020) (0.031) (0.076)
In fact, the positive impact of green energy technologies (GE),
ΔLnGDPpt − 0.943** − 0.790** − 0.803*** − 0.824*
(0.040) (0.031) (0.091) (0.008) technological innovation (TI), and environmental innovation on envi
LnORt− 1 − 0.273** − 0.132** − 0.105** − 0.128** ronmental sustainability in Saudi Arabia is both substantial and trans
(0.014) (0.042) (0.029) (0.046) formative, aligning with the country’s strategic objectives under Vision
ΔLnORt − 0.197** − 0.107*** − 0.069*** − 0.085** 2030.
(0.047) (0.062) (0.070) (0.038)
LnGEt− 0.148*** 0.193** 0.181** 0.207**
The adoption of GE, such as solar and wind energy, significantly
1
(0.094) (0.018) (0.016) (0.024) lessens dependence on fossil fuels, thereby cutting greenhouse gas
ΔLnGEt 0.106*** 0.129** 0.108** 0.088** emissions and improving air quality. For instance, projects like the
(0.072) (0.040) (0.017) (0.044) Sakaka Solar Power Plant, which generates 300 MW of clean energy,
LnTIt− 0.286** 0.175** 0.163** 0.083***
1
demonstrate Saudi Arabia’s commitment to reducing its carbon foot
(0.029) (0.032) (0.041) (0.056)
ΔLnTIt 0.584* 0.218*** 0.181** 0.114** print with projected CO2 emission reductions of 430,000 tons annually
(0.007) (0.081) (0.016) (0.026) (IRENA, 2021). Technological innovation enhances efficiency and
LnEIt− 1 0.163** 0.102** 0.197** 0.074*** resource optimization across various sectors. The Saudi Electricity
(0.049) (0.045) (0.013) (0.051) Company’s smart grid initiatives exemplify this by enhancing energy
0.143** 0.062** 0.088** 0.056***
distribution efficiency, reducing losses, and facilitating renewable en
ΔLnEIt
(0.027) (0.014) (0.038) (0.081)
LnTrt− 1 − 0.022** − 0.405** − 0.126*** − 0.201*** ergy integration (Saudi Electricity Company, 2022). Additionally, ad
(0.032) (0.024) (0.061) (0.074) vancements in water desalination, such as solar-powered plants, provide
ΔLnTrt − 0.559** − 0.662** − 0.195*** − 0.149** sustainable solutions to water scarcity, reducing the environmental
(0.043) (0.039) (0.059) (0.019)
impact of traditional methods (Saline Water Conversion Corporation,
LnUrt− 1 − 0.344** − 0.105** − 0.288** − 0.125**
(0.038) (0.012) (0.047) (0.047) 2021).
ΔLnUrt − 0.712*** − 0.141** − 0.301*** − 0.182*** Environmental innovation further contributes to sustainability
(0.090) (0.037) (0.073) (0.068) through initiatives such as the Saudi Green Initiative, which aims to
Ln(ORt− 1 × - 0.124* - - plant 10 billion trees and rehabilitate degraded land, thus enhancing
TIt− 1 ) (0.001)
ΔLn(ORt × - 0.145** - -
carbon sequestration and biodiversity (Saudi Green Initiative, 2021).
TIt ) (0.048) The shift toward a circular economy, emphasized by the Saudi Invest
Ln(ORt− 1 × - - 0.211** - ment Recycling Company, promotes resource efficiency and waste
EIt− 1 ) (0.039) reduction, supporting broader sustainable development goals by mini
- - 0.240** -
ΔLn(ORt ×
mizing the environmental footprint of industrial activities (Saudi In
EIt ) (0.024)
Ln(ORt− 1 × - - - 0.034*** vestment Recycling Company, 2020). Economically, these initiatives
GEt− 1 ) (0.076) foster environmental sustainability and drive economic diversification,
ΔLn(ORt × - - - 0.072** create jobs, and draw foreign investment, positioning Saudi Arabia as a
GEt ) (0.033) leader in sustainable development within the Gulf Cooperation Council
ECT(− 1) − 0.587* − 0.734* − 0.643* − 0.467*
region. Omri (2020) confirmed the crucial role of technological mech
(0.000) (0.000) (0.000) (0.000)
R-squared 0.8989 0.8563 0.8412 0.9250 anisms in strengthening environmental sustainability. Likewise, the re
Adjusted R- 0.8954 0.8230 0.8172 0.8848 sults are confirmed several other studies (Athari, 2024b; Han et al.,
squared 2024; Ibrahim et al., 2023a,b, c; Yan et al., 2023; Wang et al., 2024; Zou
Prob(F- 0.0000* 0.0000* 0.0000* 0.0000*
et al., 2023; Udeagha and Ngepah, 2022b; Udeagha and Ngepah, 2023a,
statistic)
b, c,; Udeagha and Muchapondwa, 2023a,b; Udeagha and Ngepah,
Note: *, **, and *** indicate a significance level of 1 %, 5 %, and 10 %, 2024).
respectively. (.) refers to p-values. The findings show further that trade (Tr) and urbanization (Ur) are
statistically significant and display negative signs, indicating that a 1 %
increase in trade and urbanization in Saudi Arabia deteriorates envi
revenues tends to prioritize immediate financial gains over long-term ronmental sustainability by 0.559 % and 0.712 % in the short term and
environmental health. by 0.022 % and 0.344 % in the long term, respectively.
Furthermore, using outdated technologies in oil extraction and the From an economic perspective, trade and urbanization in Saudi
lack of stringent environmental regulations contribute to ecological Arabia, while pivotal for economic growth, present significant chal
degradation. As a result, the sustainability of natural resources is lenges to environmental sustainability. The rapid expansion of trade has
compromised, making it challenging for Saudi Arabia to achieve its led to increased industrial activities, resulting in higher emissions of
environmental goals (Mahmood and Saqib, 2022). The findings are greenhouse gases and pollutants. For instance, the growth of the
further reinforced by Onifade et al. (2021), Huang and Guo (2022), and petrochemical industry, a cornerstone of Saudi Arabia’s trade, signifi
Mahmood and Saqib (2022), studies that exposed that natural resource cantly contributes to air and water pollution (Saudi Arabian General
rents accelerate environmental degradation and worsen environmental Investment Authority, 2023). Urbanization exacerbates these issues,
sustainability. Similarly, these results are confirmed in several recent leading to increased energy consumption, waste generation, and land
investigations (Ibrahim, 2022; Shen et al., 2022; Akram et al., 2023; Niu degradation. The construction boom in cities like Riyadh and Jeddah
et al., 2023; Ibrahim et al., 2023c; Zhang et al., 2024; Zhou et al., 2024; demands vast amounts of natural resources and results in significant
Dong et al., 2024). However, the results differ from those of Liu et al. land use changes, which disrupt local ecosystems and reduce
12
Fig. 2. Cumulative sum (CUSUM) of ES.
Fig. 3. Cumulative sum (CUSUM) of squares test of ES.
Fig. 4. Impact of oil rents on environmental sustainability.
biodiversity (Al-Thukair et al., 2022). water resources, leading to over-extraction and pollution of ground
Furthermore, urban sprawl increases the need for transportation water (Saudi Water Partnership Company, 2022). Additionally, the high
infrastructure, boosting vehicle emissions and contributing to air demand for housing and commercial spaces leads to increased energy
pollution and public health issues (World Bank, 2021). The concentra consumption, often met by fossil fuels, further deteriorating environ
tion of the population in urban areas also places immense pressure on mental quality (Ministry of Energy, 2022).
13
Fig. 5. Impact of technological innovation on environmental sustainability.
Fig. 6. Impact of green energy on environmental sustainability.
Fig. 7. Impact of environmental innovation on environmental sustainability.
While trade and urbanization drive GDP growth and job creation, the establishing that urbanization and trade upsurge environmental degra
environmental costs can undermine long-term sustainable development dation and diminish environmental sustainability.
goals. The costs associated with pollution control, health care due to Columns (3)-(5) of Table 6 indicate the moderating effects of tech
pollution-related illnesses, and loss of ecosystem services often offset the nological innovation (TI), environmental innovation (EI), and green
immediate economic benefits (OECD, 2023). Thus, there is an urgent energy technologies (GE) in the oil rents and environmental sustain
need for policies that balance economic growth with environmental ability nexus, specifying in Equation (11), Eq. (12), and Equation (13)
protection, promoting sustainable urban planning and cleaner produc the multiplicative interaction terms of Ln(OR x TI), Ln(OR x EI), and Ln
tion technologies to mitigate the adverse environmental impacts of trade (OR x GE), respectively. The predicted long- and short-term parameters
and urbanization. The findings align with those of Khan et al. (2023), of the multiplicative interaction terms are both positive and statistically
Suhrab et al. (2023) and Udeagha and Breitenbach, (2023a), b), significant, showing that technological innovation (TI), environmental
14
Fig. 8. Impact of multiplicative interaction term Ln (OR x TI) on environmental sustainability.
Fig. 9. Impact of multiplicative interaction term Ln (OR x EI) on environmental sustainability.
Fig. 10. Impact of multiplicative interaction term Ln (OR x GE) on environmental sustainability.
innovation (EI), and green energy technologies (GE) play crucial roles in depletion, greenhouse gas emissions, as well as water and air pollution.
mitigating the negative effects of oil rents on environmental sustain However, advancements in technological innovation, such as the
ability in Saudi Arabia. development of more efficient oil extraction and refining processes, help
The country’s substantial dependence on oil rents has historically reduce the environmental footprint of the oil industry by minimizing
contributed to major environmental deterioration, including resource waste and emissions (Saudi Aramco, 2022). Environmental innovations
15
Fig. 11. The graphical representation of the outcomes.
contribute further by introducing sustainable practices and technologies explained by the explanatory variables that were employed in this
that reduce environmental impacts. For example, the application of investigation. According to the predicted p-value of F-statistic, the
carbon capture and storage (CCS) technologies in industrial processes model has a good fit.
captures CO2 emissions before they are released into the atmosphere, Further, the models of this study employ the CUSUM and CUSUM-SQ
thereby lowering overall carbon emissions (IEA, 2021). EI initiatives techniques to assess the dependability and effectiveness of their
such as the circular economy model also promote the recycling and parameter values. The results are shown in Figs. 2 and 3. Since both the
reuse of materials, reducing waste and conserving natural resources. CUSUM and CUSUM-SQ curves are within the 95 % confidence interval,
Moreover, green energy technologies, such as solar and wind power, the study results show that the environmental sustainability model has
significantly reduce dependence on fossil fuels by providing clean and stable parameters.
renewable energy alternatives. Projects like the NEOM city’s green While maintaining the other exogenous factors constant, the simu
hydrogen initiative illustrate Saudi Arabia’s commitment to GE, which lations of the dynamic ARDL specification automatically depict the
aims to produce hydrogen fuel using solar energy, drastically cutting predictions of real regressor variation and its influence on the endoge
CO2 emissions (Vision 2030, 2023). This transition to renewable energy nous series. The effects of oil rents, technological innovation, green
diversifies the energy mix and lessens the environmental impact of oil energy technologies, environmental innovation, and the moderation of
rents by reducing the nation’s overall carbon footprint. Further, these technological innovation, environmental innovation, and green energy
innovations contribute to sustainable development by creating new in technologies in the oil rents and environmental sustainability nexus are
dustries and job opportunities, drawing foreign investments, and pro all projected to increase by 10 % to represent their impact on environ
moting energy security. The integration of technological innovation, mental sustainability visually. Fig. 4 displays a graph of the impulse
environmental innovation, and green energy technologies (GE) not only response for the relationship between oil rents and environmental sus
addresses the immediate environmental challenges posed by oil rents tainability. The graph illustrates the process of oil rent transition and its
but also positions Saudi Arabia as a leader in sustainable innovation in influence on environmental sustainability. An increase of 10 % shows
West Asia and the Middle East region, fostering long-term economic and that oil rents harm environmental sustainability in both the long and
environmental resilience. short term. In addition, Figs. 5, 6, and 7 demonstrate the impact of
In this context, open innovation is becoming a key mechanism technological innovation, environmental innovation, and green energy
through which Saudi Arabia can access leading-edge technologies, foster on environmental sustainability. The plots suggest that a 10 % upsurge
cross-sector collaborations and integrate external expertise into its na in technological innovation, green energy, and environmental innova
tional innovation ecosystem. By adopting an open innovation approach, tion positively impacts long-term and short-term environmental sus
Saudi Arabia can accelerate developing and implementing green tech tainability. This graphical evidence illustrates that an enhancement in
nologies and sustainable practices, thereby improving its overall envi technological mechanism impact boosts environmental quality in Saudi
ronmental performance. This approach would allow the country to Arabia in both the long and short term. Further, Figs. 8, 9, and 10 exhibit
benefit from global sustainability advances while bringing innovations the moderating effect of technological innovation, environmental
to the broader international community. The results suggest that pro innovation, and green energy technologies in the oil rents and envi
moting an open innovation culture could help achieve the ambitious ronmental sustainability nexus. This is indicated by the multiplicative
goals set in Saudi Arabia’s 2030 Vision. It would allow the country to interaction terms and by using an impulse response plot. The figures
balance economic growth and environmental management more demonstrate that a 10 % rise in the moderating effect has improved
effectively. environmental sustainability in both the short-term and long-term. This
In addition, the error correction term (ECT) indicates the adjustment research confirms that the moderating effect of different technological
speed. In fact, the projected parameter on ECT(-1) is shown in Table 6 to mechanisms in the oil rents and environmental sustainability nexus
be negative and statistically significant, suggesting a long-term improves the environment in Saudi Arabia in both the long and short
connection between the variables under investigation. For instance, term. In bref, the underlying economic insights suggest that the coun
column (2), with an estimated coefficient of − 0.587 shows that 58.7 % try’s dependence on fossil fuel revenues strongly influences the inter
of the disequilibrium is corrected in the long run. According to the R- action between oil rents and environmental sustainability in Saudi
squared value, 89 % of the variance in environmental quality can be Arabia. This dependency generally leads to higher levels of
16
Table 7 Table 8
Results of robustness from FMOLS. Results of robustness from DOLS.
LnES (Environmental sustainability) LnES (Environmental sustainability)
Equation Equation Equation Equation Equation Equation Equation Equation

(10) (11) (12) (13) (10) (11) (12) (13)
Cons 0.142* 0.133* 0.147* 0.150* Cons 0.096* 0.130* 0.148** 0.106*
(0.000) (0.000) (0.000) (0.000) (0.009) (0.000) (0.035) (0.008)
LnESt− 1 0.851* 0.225* 0.345* 0.210* LnESt− 1 0.701* 0.132* 0.214* 0.170*
(0.002) (0.001) (0.000) (0.000) (0.000) (0.000) (0.000) (0.000)
LnGDPpt− 1 − 0.314** − 0.587** − 0.521** − 0.219** LnGDPpt− 1 − 0.410* − 0.418** − 0.408*** − 0.676***
(0.031) (0.040) (0.022) (0.047) (0.007) (0.031) (0.057) (0.094)
ΔLnGDPpt − 0.481** − 0.666** − 0.762** − 0.702* ΔLnGDPpt − 0.478** − 0.810** − 0.324* − 0.455*
(0.038) (0.029) (0.012) (0.000) (0.022) (0.026) (0.008) (0.000)
LnORt− 1 − 0.300* − 0.122** − 0.140** − 0.184** LnORt− 1 − 0.324* − 0.117* − 0.087* − 0.093*
(0.000) (0.034) (0.025) (0.036) (0.000) (0.003) (0.000) (0.001)
ΔLnORt − 0.100** − 0.151*** − 0.102*** − 0.092* ΔLnORt − 0.081* − 0.131* − 0.151* − 0.120*
(0.040) (0.051) (0.059) (0.000) (0.004) (0.002) (0.004) (0.000)
LnGEt− 1 0.108* 0.107* 0.120** 0.081** LnGEt− 1 0.075*** 0.109** 0.114** 0.129**
(0.000) (0.000) (0.020) (0.000) (0.000) (0.004) (0.000) (0.000)
ΔLnGEt 0.153* 0.070* 0.069* 0.059* ΔLnGEt 0.079* 0.068* 0.090* 0.100**
(0.000) (0.000) (0.000) (0.000) (0.000) (0.000) (0.001) (0.023)
LnTIt− 1 0.166* 0.145* 0.103* 0.101* LnTIt− 1 0.168** 0.158** 0.138** 0.069**
(0.000) (0.000) (0.000) (0.000) (0.030) (0.044) (0.039) (0.047)
ΔLnTIt 0.271* 0.199* 0.132* 0.144* ΔLnTIt 0.481* 0.189** 0.113** 0.145**
(0.001) (0.000) (0.003) (0.008) (0.000) (0.041) (0.022) (0.036)
LnEIt− 1 0.104* 0.098* 0.088* 0.067* LnEIt− 1 0.135** 0.121** 0.172** 0.105**
(0.000) (0.000) (0.000) (0.000) (0.029) (0.034) (0.023) (0.047)
ΔLnEIt 0.131* 0.087** 0.064** 0.080* ΔLnEIt 0.130** 0.112** 0.097** 0.068**
(0.004) (0.027) (0.044) (0.009) (0.030) (0.045) (0.027) (0.041)
LnTrt− 1 − 0.074* − 0.133* − 0.132* − 0.144* LnTrt− 1 − 0.109** − 0.321** − 0.164** − 0.185**
(0.000) (0.000) (0.002) (0.007) (0.033) (0.041) (0.011) (0.047)
ΔLnTrt − 0.410*** − 0.471** − 0.232** − 0.160*** ΔLnTrt − 0.322** − 0.417** − 0.158*** − 0.197***
(0.085) (0.042) (0.031) (0.071) (0.014) (0.024) (0.088) (0.074)
LnUrt− 1 − 0.192* − 0.106** − 0.101** − 0.083** LnUrt− 1 − 0.277** − 0.151** − 0.166** − 0.118**
(0.007) (0.049) (0.033) (0.029) (0.040) (0.019) (0.039) (0.024)
ΔLnUrt − 0.082*** − 0.109** − 0.244** − 0.155** ΔLnUrt − 0.314** − 0.119*** − 0.187*** − 0.127**
(0.051) (0.020) (0.039) (0.047) (0.043) (0.066) (0.052) (0.038)
Ln(ORt− 1 × - 0.147* - - Ln(ORt− 1 × - 0.149* - -
TIt− 1 ) (0.000) TIt− 1 ) (0.000)
ΔLn(ORt × - 0.188* - - ΔLn(ORt × TIt ) - 0.151* - -
TIt ) (0.009) (0.000)
Ln(ORt− 1 × - - 0.177** - Ln(ORt− 1 × - - 0.122* -
EIt− 1 ) (0.017) EIt− 1 ) (0.000)
ΔLn(ORt × - - 0.120* - ΔLn(ORt × EIt ) - - 0.130* -
EIt ) (0.000) (0.007)
Ln(ORt− 1 × - - - 0.105* Ln(ORt− 1 × - - - 0.049**
GEt− 1 ) (0.001) GEt− 1 ) (0.021)
ΔLn(ORt × - - - 0.097** ΔLn(ORt × - - - 0.067*
GEt ) (0.024) GEt ) (0.006)
R-squared 0.9095 0.9284 0.9177 0.9537 R-squared 0.9856 0.9845 0.9671 0.9764
Adjusted R- 0.9012 0.9148 0.8996 0.9140 Adjusted R- 0.9587 0.9521 0.9327 0.9422
squared squared
Prob(F- 0.0000* 0.0000* 0.0000* 0.0000* Prob(F- 0.0000* 0.0000* 0.0000* 0.0000*
statistic) statistic)
Note: *, **, and *** indicate the significance level at 1 %, 5 %, and 10 %, Note: *, **, and *** indicate the significance level at 1 %, 5 %, and 10 %,
respectively. (.) refers p-values. respectively. (.) refers p-values.
environmental degradation, and the economic activities fuelled by oil has performed the FMOLS (Fully Modified Ordinary Least Squares) and
rents tend to favor short-term economic gains over long-term environ DOLS (Dynamic Modified Ordinary Least Squares) tests on the empirical
mental considerations. However, introducing and expanding technology models (Saliba et al., 2022; Omokanmi et al., 2022; Udeagha and Nge
innovation, environmental innovation and green energy technologies pah, 2022a, 2023a and b; Udeagha and Muchapondwa, 2023d; Dong
counterbalance these negative impacts. These innovations help et al., 2024).
decouple economic growth from environmental damage by improving Table 7 and Table 8 present the findings of this empirical analysis.
efficiency, reducing emissions and promoting sustainable practices. The The outcomes provide evidence that all the coefficients have exhibited
results imply that for Saudi Arabia and similar oil-dependent economies, consistency across the empirical models. This confirms the strength and
investing in these innovations benefits the environment and supports reliability of the results, validating their robustness.
long-term economic growth in an increasingly sustainable world. The
graphical representation of the outcomes is presented in Fig. 11. 6. Conclusion and policy implications
5. Robustness check 6.1. Conclusion
In order to assess the reliability of the model estimates, this research Environmental sustainability is essential to ensuring the long-term
17
health of the planet, preserving ecosystems, biodiversity and natural thus fostering a more sustainable industrial base.
resources, while combating climate change, reducing pollution and The results also highlight the need to cultivate an open innovation
promoting a healthier environment. For Saudi Arabia, where economic culture in Saudi Arabia. By encouraging cross-sectoral collaboration and
growth heavily depends on oil rents, sustainability is particularly crucial integrating external expertise, the country can more effectively leverage
due to the environmental degradation associated with this dependence. global advances in sustainable development. This approach would allow
This study is motivated by exploring the underestimated relationship Saudi Arabia to remain at the forefront of environmental innovation,
between oil rents and environmental sustainability in this context. In building on international best practices while contributing to the global
fact, this work explores the moderating effects of technological inno knowledge base.
vation, environmental innovation, and green energy technologies in the Finally, the study suggests that while trade and urbanization are
oil rents and environmental sustainability nexus in Saudi Arabia from drivers of economic growth, they can also exacerbate environmental
1990 to 2022. To do this, the novel dynamic ARDL simulations specified degradation if not managed carefully. It is, therefore, essential that
by Jordan and Philips (2018) is implemented. Saudi Arabia implement policies to promote sustainable urban planning
The findings indicate that the coefficients estimated for both long- and cleaner production technologies. This could involve stricter envi
term and short-term economic growth are negative and statistically ronmental regulations, the promotion of green construction practices
significant. This suggests that economic expansion in Saudi Arabia leads and incentives for industries to adopt cleaner production methods. By
to a decrease in environmental sustainability by increasing the level of addressing these areas, Saudi Arabia can ensure that its economic
carbon dioxide emissions. Moreover, predicted long- and short-term development is aligned with its environmental sustainability goals, ul
coefficients on oil rents are both negatively correlated and statistically timately achieving a balanced and sustainable growth trajectory.
significant, suggesting that the rise in oil rents in Saudi Arabia reduces
environmental sustainability. In addition, the calculated short- and long- 6.3. Limitations and future directions
run parameters for green energy technologies (GE), technological
innovation (TI), and environmental innovation (EI) are found to be The study recognizes several limitations that offer potential research
statistically significant and positive, signifying that the increase in green leads. First, the focus on Saudi Arabia, while relevant because of its large
energy technologies, technological innovation, and environmental oil reserves, limits the generalizability of results to other oil-rich econ
innovation in Saudi Arabia enhances environmental sustainability. omies with different socio-economic or political contexts. Broadening
Further, the findings show that trade (Tr) and urbanization (Ur) are future research to include cross-country comparative analysis could
statistically significant and display negative signs, indicating that the provide a better understanding of how regional factors influence the
increase in trade and urbanization in Saudi Arabia degrades environ relationship between oil rents and environmental sustainability. In
mental sustainability both in the short and long term. In addition, the addition, the study’s time-frame, which covers data from 1990 to 2022,
finding of the moderating effects of technological innovation (TI), may not fully reflect the latest technological advances and policy
environmental innovation (EI), and green energy technologies (GE) in changes that could impact this relationship. Future studies could benefit
the oil rents and environmental sustainability nexus show that the pre from integrating more recent data and exploring the effects of emerging
dicted long- and short-term coefficients of the multiplicative interaction technologies, such as carbon capture and storage (CCS).
terms are both positive and statistically significant. This shows that From a methodological point of view, although the dynamic ARDL
technological innovation (TI), environmental innovation (EI), and green model used in this study provides solid information, it has limitations,
energy technologies (GE) play crucial roles in mitigating the negative especially with regard to taking into account potential endogeneity
effects of oil rents on environmental sustainability in Saudi Arabia. problems and capturing non-linear relationships. Future research could
look at these non-linear dynamics and explore the threshold effects
6.2. Policy implication where the impact of oil rents on environmental sustainability changes at
different levels of technological innovation or economic diversification.
The findings of this study offer several important policy implications In addition, integrating the social and governance dimensions into the
for Saudi Arabia, which is seeking to balance economic growth with analysis could provide a more complete understanding of how policy
environmental sustainability. First, the important role of technological frameworks, governance quality, and public awareness influence the
innovation in mitigating the adverse environmental effects of oil rents effectiveness of technological and environmental innovations in miti
highlights the need for the country to prioritize investment in advanced gating the environmental impacts of oil rents. These considerations
technologies. This could include developing and deploying carbon underscore the need for further research to build on the findings of this
capture and storage (CCS) systems, smart grid technologies and other study and improve our understanding of the complex investigated
innovations that improve energy efficiency and reduce carbon emis interaction in economies dependent on resources.
sions. Such investments would address immediate environmental con
cerns and position Saudi Arabia as a leader in the global transition to a Ethical approval
low-carbon economy.
Furthermore, the positive impact of green energy technologies on Ethical approval is not applicable for this article
environmental sustainability suggests that accelerating the transition to
renewable energy sources is crucial. Saudi Arabia should increase its Authors contributions
investment in solar, wind and other renewable energy projects, aligning
these efforts with the goals of its 2030 Vision. This transition would Montassar Kahia Project administration, Conceptualization, Formal
reduce the country’s dependence on fossil fuels, thereby reducing its analysis, software, writing — original draft. Anis Omri: Formal analysis,
carbon footprint and contributing to global efforts to mitigate climate writing — original draft.
change.
The study also highlights the importance of environmental innova Ethical statement
tion, particularly in developing sustainable practices and adopting cir
cular economy models. Policymakers should incentivize companies to We confirm that this work is original, has not been published else
invest in environmentally friendly technologies and practices, such as where, and is not under consideration by any other journal. Informed
tax breaks, grants and subsidies for companies demonstrating leadership consent was obtained from human participants, and animal studies
in sustainable development. These incentives would encourage the followed approved protocols. We affirm the accuracy of the data pre
widespread adoption of environmental innovations in various sectors, sented, adherence to ethical guidelines, absence of conflicts of interest,
18
and unanimous approval from all authors. Balsalobre-Lorente, D., Shahbaz, M., Roubaud, D., Farhani, S., 2018. How economic
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Journal of Open Innovation: Technology, Market, and Complexity 10 (2024) 100366

Contents lists available at ScienceDirect

Journal of Open Innovation: Technology, Market,

Oil rents and environmental sustainability: Do green technologies and

Available online 14 August 2024

Fig. 1. Graphical representation of environmental impacts and mitigation pathways.

Environmental sustainability Proxied by environmental performance index ES World Bank (2023)

ln ESt = β0 + β1 ln ESt− 1 + β2 ln GDPPt + β3 ln ORt + β4 ln GEt + β5 ln TIt

methods. To address the issue of heteroscedasticity, the series is trans­

ln ESt = β0 + β1 ln ESt− 1 + β2 ln GDPpt + β3 ln ORt + β4 ln(ORt × TIt ) + β5 ln GEt

Mean 53.30 18492.65 0.0187 71.049 1427.60 81.117 34.118 209.770

Several often-employed unit root tests are the Kwiatkowski-Phillips-

ln ESt = β0 + β1 ln ESt− 1 + β2 ln GDPpt + β3 ln ORt + β4 ln(ORt × EIt ) + β5 ln GEt

to take into account temporal aggregation in the data, deterministic

ln ESt = β0 + β1 ln ESt− 1 + β2 ln GDPpt + β3 ln ORt + β4 ln(ORt × GEt ) + β5 ln GEt

3.3. Cointegration test ∑q ∑q ∑q

(2021) enables the inclusion of either mixed or same-order integration.

Δ ln ESt = β0 + β1 ln ESt− i + β2 ln GDPp(t− 1) + β3 ln ORt− i + β4 ln GEt− i + β5 ln TIt− i

evaluated using the Jarque-Bera Test. Further, the correct specification

the long- and short-term parameters of the factors under consideration

Δ ln ESt = π 0 + α0 ln ESt− 1 + ϕ1 Δ ln GDPpt + β1 ln GDPp(t− 1) + ϕ2 Δ ln ORt + β2 ln ORt− 1

the approach of dynamic ARDL simulations can automatically plot,

Δ ln ESt = π 0 + α0 ln ESt− 1 + ϕ1 Δ ln GDPpt + β1 ln GDPp(t− 1) + ϕ2 Δ ln ORt + β2 ln ORt− 1

Δ ln ESt = π 0 + α0 ln ESt− 1 + ϕ1 Δ ln GDPpt + β1 ln GDPp(t− 1) + ϕ2 Δ ln ORt + β2 ln ORt− 1

Δ ln ESt = π 0 + α0 ln ESt− 1 + ϕ1 Δ ln GDPpt + β1 ln GDPp(t− 1) + ϕ2 Δ ln ORt + β2 ln ORt− 1

Level I(0) Δ Level I(0) Δ Level I(0) Δ Level I(0) Δ

LnES − 1.575(0.780) − 8.174*(0.000) − 1.412(0.502) − 9.242*(0.000) 0.088 0.133*** − 1.588* − 0.620*

0 144.5801 NA 2.06e− 14 − 8.811619 − 8.441558 − 8.690989

Note: * indicates the optimal lag order selected by the criterion.

Bounds cointegration testing F–Bounds Test 5.595* Cointegration exists

Fig. 2. Cumulative sum (CUSUM) of ES.

Fig. 3. Cumulative sum (CUSUM) of squares test of ES.

Fig. 4. Impact of oil rents on environmental sustainability.

Fig. 5. Impact of technological innovation on environmental sustainability.

Fig. 6. Impact of green energy on environmental sustainability.

Fig. 7. Impact of environmental innovation on environmental sustainability.

Fig. 8. Impact of multiplicative interaction term Ln (OR x TI) on environmental sustainability.

Fig. 9. Impact of multiplicative interaction term Ln (OR x EI) on environmental sustainability.

Fig. 11. The graphical representation of the outcomes.

Equation Equation Equation Equation Equation Equation Equation Equation

5. Robustness check 6.1. Conclusion

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methods. To address the issue of heteroscedasticity, the series is trans

LnES − 1.575(0.780) − 8.174(0.000) − 1.412(0.502) − 9.242(0.000) 0.088 0.133*** − 1.588* − 0.620*