Work

Carbon pricing, growth, and green financing: Policy options for Saudi Arabia

Year: 2026

Type: article

Abstract: This study designs carbon-pricing policy scenarios to support Saudi Arabia’s twin goals of decarbonization and macro-fiscal development for 2025–2040. We propose three scenarios for a carbon tax: an early start with revenues spent under typical budget patterns; a two-year delayed start combined with short-term solar incentives financed by green bonds; and a similar delay, but with carbon price revenues recycled into continuous, long-term solar-capacity expansion programs. Using a semi-structural macro-sectoral econometric model extended with energy and emissions linkages, we find that if policymakers implement early carbon pricing without long-term renewable energy financing, this achieves emissions reduction but dampens economic growth. By contrast, channeling carbon price revenues into renewable financing brings even moderate economic growth, while deepening decarbonization.

Source: Journal of Policy Modeling

DOI: 10.1016/j.jpolmod.2026.01.002

Authors: Carlo Andrea Bollino, Fakhri J. Hasanov, Heyran Aliyeva, Majed Almozaini

Institutions: University of Perugia, Marconi University, King Abdullah Petroleum Studies and Research Center, Libera Università Internazionale degli Studi Sociali Guido Carli

Language: English

Topic: Climate Change Policy and Economics

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDGs: Climate action, Affordable and clean energy

Open Access status: hybrid

Estimated APC paid: $1,500