The role of carbon pricing in the relationship between air freight and environmental resource depletion: a case study of Saudi Arabia

Abstract

Abstract: The relationship between air freight and environmental resource depletion is a widely explored area in different economic settings. There, however, is limited work available in the mediation of carbon pricing between air freight and environmental resource depletion, which is the focus of this study in the context of Saudi Arabia. This study aims to examine the role of carbon pricing in the relationship among air freight, foreign direct investment inflows, economic growth, and natural resource depletion in Saudi Arabia by using time series data from 1970 to 2017. The study employed a nonlinear autoregressive distributed lag model to find the short-term and long-term relationship between the variables. The results reveal that in the short term, the negative shocks of air freight exhausted natural resources, while in the long term, both the positive and negative shocks of air freight drain the country’s environmental resources. The study verified the inverted U-shaped relationship between initial economic growth and natural resource depletion in the short term, while this result disappeared in the long term. There is a positive relationship between foreign direct investment inflows and natural resource depletion to support the “pollution haven” hypothesis in the short term. In the long term, carbon pricing advances the natural resource market to support the country’s environmental sustainability agenda. There is a high need to formulate sustainable air freight policies to mitigate the negative environmental concerns in the country. Graphic abstract: [Figure not available: see fulltext.].