Profitability and environmental sustainability: analyzing the energy sector's role in Saudi Arabia's sustainable development

Abstract

Purpose – This study examines the relationship between energy sector profitability and environmental sustainability in Saudi Arabia, with a focus on carbon emissions and energy efficiency. Design/methodology/approach – This study employs a quantitative research design, over the time period of 2010–2023, using ordinary least squares (OLS) regression to analyze the impact of energy sector profitability on environmental sustainability indicators such as carbon emissions and energy efficiency. Findings – The emissions model indicates a strong fit (Adj. R2 = 0.68; R2 = 0.82; DW = 2.03; p < 0.05), revealing that improvements in energy productivity (Y1) and overall economic growth (C1) significantly contribute to lowering environmental pressures, while oil-revenue dependency (Y2) and population growth (C2) show no meaningful impact on emissions. The energy-intensity model demonstrates good explanatory power as well (Adj. R2 = 0.65; R2 = 0.80; p = 0.051; DW = 1.58), indicating that reliance on oil revenues (Y2) significantly enhances energy efficiency, while profitability (Y1), economic growth (C1) and population growth (C2) do not exhibit substantial influence. Practical implications – The results of this study can help in strategic planning of the country by aligning economic growth with environmental sustainability goals by utilizing the profitability of the energy industry as a tool to improve energy efficiency and lower carbon emissions. Social implications – This study supports Saudi Arabia's Vision 2030. Improved efficiency can ease fiscal space for clean-energy investment, supporting SDG 7 and SDG 13. Originality/value – This study uniquely explores how profitability in Saudi Arabia's energy sector influences both emissions reduction and energy efficiency.