Yousif Osman

Climate change represents one of the most serious threats to the well-being of humanity. In recent decades, there has been a significant increase in the amount of research dedicated to analysing the economic impacts of climate change. Nevertheless, the spatial aspect of climate change has not been addressed. This research is the first to empirically assess both direct and indirect (spillover) effects of climate change, as measured by temperature variations, on economic growth. The empirical analysis is based on a balanced dataset for 86 countries between 1980 and 2019. The preliminary analysis suggests the presence of spatial autocorrelation and the suitability of the dynamic spatial autoregressive model to assess the spillover effects of climate change. The results for the full sample reveal that there are no substantial short- or long-run effects of climate change on economic growth. When the sample is decomposed by income, the analysis indicates that climate change has direct and indirect spillover effects on economic growth only in low–middle-income countries over the short- and long run. The decomposition according to the climate regime also yields interesting findings as climate change exerts adverse direct and indirect spillover effects on economic growth only in the hottest countries over the long run. These findings are robust since they hold regardless of whether the contiguity weight matrix or the inverse distance weight matrix is used. The research advocates for international collaboration in the design and implementation of climate change mitigation and adaptation strategies.

This study is based on the idea that Saudi Arabia’s Vision 2030 considered the achievement of economic diversification is very crucial for the economy. In turn, this target requires a sustained increase in the contribution of the manufacturing sector in Gross Domestic Product (GDP). At the same time, the transition towards industrialization might trigger high rates of CO₂ emissions, due to the escalated manufacturing demand for primary energy consumption (specifically fossil fuel). Ultimately, the high rates of CO₂ emissions would have severe environmental consequences, such as environmental degradation. These environmental consequences might be more dangerous in a country extensively dependent on oil, such as Saudi Arabia. The study aims to investigate the manufacturing and environment nexus in an attempt to explore the validity of the inverted U-shaped curve, the so-called Kuznets hypothesis, during 1971–2021. Applying the econometric model autoregressive distributed lag (ARDL), the findings of the study do not show evidence supporting the validity of an inverted U-shaped Kuznets function in Saudi Arabia during the period of the study. Furthermore, the short-term results do not confirm the impact of increasing manufacturing on CO₂ emissions. However, there are indications of positive effects, although limited, in the long-term.