Abstract
This study attempts to analyze the effect of total oil consumption and oil consumption in the transport22Oil consumption in the transport sector includes jet oil fuel consumption, gasoline consumption, and light fuel oil consumption. sector on the environmental quality of Saudi Arabia over the period from 1971 to 2013. A structural time series technique is used in this study to expose the underlying energy demand trend (UEDT) for the total carbon emissions and carbon emissions from the domestic transport sector. The results reveal that the trend is nonlinear and stochastic both for carbon emissions and for carbon emissions from the transport sector. In both models, the elasticity of carbon emissions with respect to income and the square of income are positive and significant, which implies that there is a monotonically increasing relationship between carbon emissions and income in Saudi Arabia. The results further reveal that the elasticity of carbon emissions with respect to total oil consumption and transport oil consumption are positive and significant. The empirical findings of this study demonstrate that a growth in real income forces CO2 emissions to grow, whereas the reverse is not true for both models.