Introduction

Aside from other necessities, energy has been shown to be one of the most important necessities of daily existence. Without energy consumption, daily living suffers, and economies cannot flourish due to the reliance on energy consumption. Energy demand is increasing as the world’s population grows. However, it is also a fact that major energy sources worldwide are fossil fuels, including coal, oil, and gas (Abas et al. 2015). These energy sources cause significant environmental problems such as increasing carbon emissions, air pollution, and global warming. Carbon emissions have now surpassed 35 billion tons (IEA 2023), as seen in Fig. 1. Since 1950, there has been a significant incline in global carbon emission. The primary culprit, among many others, is the use of fossil fuels. It is also predicted that this issue will be more intense in the future because fossil fuel–based energy consumption will increase with time.

Fig. 1
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Annual CO2 emission in billion tons (IEA 2023)

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Recently, the UK hosted the 26th UN Climate Change Conference of the Parties (COP26) with an aim to revisit the achievements to safeguard climate, as well as to ensure the countries participate in combating the environmental issues (Ibrahim 2022a, 2022b; Ibrahim et al. 2022). According to COP26, the rich countries will deliver 100 billion US dollars to the poor countries which will make them able to increase the proportion of renewable energy in the energy mix. Saudi Arabia as a responsible country understands the importance of environmental issues; however, it targets to zero emission by 2060 with an investment of 180 billion US dollars (IEA 2023).

These issues require a sustainable solution in the form of renewable energy to cut down carbon emissions and stop global warming. Current projections indicate that the allowed emissions to prevent global warming are running low in order to achieve net-zero emissions by 2050 (Jaumotte and Schwerhoff 2021; Sarwar and Alsaggaf 2021; Waheed et al. 2018). Despite this, a rapid change in energy structure is required to avoid 2 to 3 °C of global warming exceeding the targets (Australian Academy of Science 2021). Therefore, it is necessary to quickly reduce the emission of hazardous gases from all economic sectors. For this purpose, countries are utilizing the hydrogen economy concept to combat climate change issues and increase the decarbonization speed. As a result, various projects involving green hydrogen production have been launched around the world. Saudi Arabia is also among the countries with efforts to manufacture green hydrogen. Saudi Arabia, the world’s largest oil producer, recently announced aspirations to become the world’s largest generator of green hydrogen (Al-Atrush 2022). This project helps the country to fulfill its economic diversification plans. The abundance of sunshine and wind can help Saudi Arabia use renewable energy to produce green hydrogen. Moreover, the production of blue carbon is also in the plan, and a gas field is assigned for this task. This helps fulfill the energy demand of the growing population and reduces the carbon footprint of Saudi Arabia.

Although Saudi Arabia intends to become the market leader in hydrogen production and export, several other countries are also in the running. These nations have similarly great aspirations for hydrogen. Russia aims for 20% of the hydrogen market by 2030, while the United Arab Emirates has declared its hydrogen plant and desires to obtain 25% of the market by 2030. Similarly, Oman, Morocco, and Egypt have stated their willingness to build plants. It is worth noting that the UAE is Saudi Arabia’s neighbor and close ally, but the two countries are also locked in a struggle over hydrogen production and exports (Al-Atrush 2022).

The current study has multifold contributes to the existing literature: firstly, this is the pioneer study that examines the impact of blue and green hydrogen on carbon emission for Saudi Arabia. Previously, a large number of studies have examined the significance of nonrenewable energy and renewable energy to counter carbon emission. On contrary to the earlier literature, we utilized the hydrogen-based energy indicators to foresee their impact of carbon emission. Secondly, the analysis incorporates the forecasted data for econometric techniques which covers the forecasted values from 2020 to 2050. The earlier studies have picked the secondary data which mainly consist of past data. Whereas, this study incorporates future data to investigate the significant response of carbon emission due to the hydrogen-based energy indicators. In concise, the findings are useful to foresee the future role of hydrogen to mitigate carbon emission, in perspective of Saudi Arabia. Thirdly, we use the theoretical and empirical approaches to investigate the prospects of green hydrogen in Saudi Arabia. A large number of previous studies have emphasized a single approach, theoretical or empirical, whereas, this study used the combined approach which is beneficial to validate the theoretical results with the help of empirical estimations.

On the basis of contribution, we define some objectives of the current study which assist us leads the results to draw the practical contribution of the study. Firstly, we examine the role of blue natural gas on carbon emission, in Saudi Arabia; secondly, the significance of green electricity on carbon emission; thirdly, green associated renewable energy on carbon emission; fourthly, comparing the theoretical and empirical conclusions.

Theoretical framework

The global energy paradigm has been shifting, with hydrogen-based energy emerging as a cornerstone for sustainable energy systems. The relationship between hydrogen energy and carbon emissions can be conceptualized through two primary dimensions: production methodologies and end-use applications. Firstly, hydrogen’s carbon footprint varies based on its production route. Traditional methods, like steam methane reforming (SMR), primarily derive hydrogen from natural gas, leading to substantial CO2 emissions (Ji and Wang 2021). However, electrolysis, especially when powered by renewables, presents a cleaner alternative, producing hydrogen with minimal carbon byproducts (Marouani et al. 2023). This dichotomy in production pathways directly influences the carbon intensity of hydrogen as an energy vector. End-use applications further elucidate carbon dynamics. Hydrogen offers substantial emissions reduction potential when employed in fuel cell vehicles (FCVs) or as a substitute in industries traditionally reliant on carbon-intensive fuels (Khan and Al-Ghamdi 2023).

Nonetheless, the actual carbon mitigation depends heavily on the initial hydrogen source. FCVs powered by hydrogen from renewable sources achieve significant life-cycle emissions reductions. However, those using hydrogen from SMR exhibit marginal benefits unless combined with effective carbon capture and storage (CCS) techniques (Watabe and Leaver 2021). Complementary to production and application are the storage and transportation of hydrogen. Advanced storage solutions and efficient transportation mechanisms can further optimize the carbon efficiency of hydrogen-based energy systems. While these areas are less direct in their carbon impact, inefficiencies or energy-intensive processes could offset some of the benefits hydrogen offers (Dawood et al. 2020).

Literature review

Researchers tried to explore the nexus between renewable energy and carbon emissions, but few also checked the significance of hydrogen energy. Jacobson et al. (2017) assert that the transition to 100% renewable energy sources can significantly mitigate global warming. Renewable energy technologies, predominantly wind, solar, and hydropower, have the potential to reduce carbon emissions by substituting conventional energy sources, which are responsible for high carbon dioxide emissions. Their study found a marked reduction in energy-related carbon emissions when transitioning from fossil fuel–based energy production to renewable energy sources.

Similarly, an extensive study by Creutzig et al. (2018) elucidated that renewables, when integrated with energy storage systems and smart grids, can facilitate more substantial reductions in carbon emissions than when these technologies function independently. This synergistic approach ensures reliability, flexibility, and energy system decarbonization. In addition, the research highlighted the importance of policy incentives to encourage the adoption of renewable technologies, thus speeding up the reduction in carbon emissions. The potential of renewable energy sources to diminish carbon emissions is evident, but the actual rate of carbon mitigation is contingent on multiple factors. Xu and Lin (2016) analyzed the effect of renewables on carbon emissions and concluded that regional factors, such as renewable resource availability and energy infrastructure, play a crucial role. For instance, regions abundant in solar radiation are more likely to experience a steeper decline in emissions upon adopting solar energy than those with sparse solar radiation.

Furthermore, the replacement of carbon-intensive energy sources with renewables has socioeconomic implications. The study of Ciacci and Passarini (2020) indicated that transitioning to renewables can result in job creation, particularly in manufacturing, installing, and maintaining renewable energy technologies. These job opportunities can offset losses in traditional energy sectors, thus propelling a socioeconomically sustainable transition. However, there are challenges. Renewable energy sources, while promising, have intermittency and scalability issues. According to the findings of Hirth (2016), due to weather fluctuations, the variability in the output from wind and solar energy systems demands efficient energy storage solutions to maintain a consistent energy supply and thus ensure a meaningful reduction in carbon emissions. In addition, integrating these renewables into existing grids without causing grid instability is another pressing concern. It is noteworthy that renewables’ carbon footprint is not entirely zero. Pehnt (2006) delved into the life-cycle emissions of renewable energy technologies and found that while they have significantly lower emissions than fossil fuels, they still have emissions associated with their manufacturing, transportation, installation, and end-of-life disposal. However, these emissions are minimal in comparison and will decrease as technological advancements and recycling processes improve.

While most research underscores the positive impact of renewable energy on carbon emission reductions, certain studies have adopted a nuanced perspective. For instance, Loftus et al. (2015) emphasized that the rapid deployment of renewables without considering the broader energy mix could lead to systemic inefficiencies. They argued that an over-reliance on one renewable source might lead to periods of energy surplus or deficit, requiring backup from conventional fossil fuels and negating some emission reduction benefits. Another significant aspect is the role of government policies and international cooperation. Sovacool et al. (2018) suggest that countries with robust policy frameworks supporting renewable energy witnessed a surge in renewable energy adoption and a marked decline in carbon emissions. In contrast, countries without these frameworks lagged in both renewable energy adoption and emission reductions. The energy transition’s social dimensions, especially in developing nations, are explored in depth (Aklin et al. 2017). They argued that while developed countries have the luxury of transitioning based on environmental reasons, developing nations prioritize access and affordability. Renewable energy, particularly decentralized systems like microgrids, can offer dual benefits in such scenarios by reducing carbon emissions and providing energy access to underserved populations. Furthermore, a collaborative approach to renewable energy integration is emphasized by Schmidt et al. (2017). They illustrated that cross-border energy sharing, facilitated by transnational grids, can effectively mitigate the intermittency issues associated with renewables. By pooling energy resources and leveraging geographical and temporal variations, regions can ensure a more stable renewable energy supply and consequent carbon emission reductions. Khan et al. (2023) accentuate the intertwined relationship between energy efficiency, carbon neutrality, and technological advancements, contending that these elements are pivotal in transitioning towards a green economy. Their discourse underscores that leveraging technological innovation can optimize energy efficiency and achieve carbon neutrality, amplifying the green economy’s momentum. Complementarily, Lanre Ibrahim et al. (2022) delve into Africa’s renewable energy dynamics, emphasizing its heterogeneous impact on environmental pollution. They posit that while renewable energy and structural shifts can curb environmental degradation, the presence of vast natural resources and environmental technologies further alleviates the environmental strain, reinforcing sustainable development.

Hydrogen energy has gained momentum as a promising clean energy carrier. In the quest to decarbonize the global energy system, hydrogen’s potential role cannot be understated. However, hydrogen production and utilization vary in their carbon emission implications, warranting close examination. Central to the hydrogen-carbon emissions discourse is the production method. The predominant hydrogen production technique, steam methane reforming (SMR), extracts hydrogen from natural gas, a process accompanied by significant CO2 emissions (Cho et al. 2022). While carbon capture and storage (CCS) technologies can reduce these emissions, their efficacy and economic viability remain debated (Lawson 2018). Contrastingly, water electrolysis, powered by renewable energy sources, offers a route to “green hydrogen” production, significantly diminishing associated carbon emissions (Carmo et al. 2013). However, challenges related to efficiency, scalability, and costs persist.

Transportation is another sector where hydrogen is eyed as a transformative element. Hydrogen fuel cell vehicles (FCVs) produce no tailpipe emissions, emitting only water vapor. However, the carbon footprint of hydrogen FCVs depends largely on the hydrogen source. Using hydrogen from renewable energy can significantly reduce life-cycle greenhouse gas (GHG) emissions compared to conventional vehicles, as highlighted by Offer et al. (2010). Nevertheless, when relying on hydrogen from SMR without effective CCS, the benefits diminish. Beyond mobility, hydrogen can play a role in heating and industrial applications, particularly in sectors that are hard to electrify. Studies indicate that using hydrogen in high-temperature processes, like steelmaking, can substantially reduce industrial carbon emissions (EASAC 2019). Transitioning from carbon-intensive processes to hydrogen-based alternatives necessitates infrastructural and technological changes, raising questions about economic feasibility and transition speed.

Storage and transportation of hydrogen present another layer of complexity. Liquid organic hydrogen carriers and metal-organic frameworks are two emerging solutions for hydrogen storage, reducing carbon emissions related to hydrogen transportation (Suh et al. 2012). These technologies, however, are still in nascent stages and must overcome challenges related to efficiency, safety, and costs before widespread deployment. Moreover, the integration of hydrogen into existing energy systems presents its set of challenges and opportunities. Blending hydrogen into natural gas networks, for instance, can reduce carbon emissions but is constrained by the hydrogen tolerance of pipelines and appliances (Cristello et al. 2023).

Conversely, while free from blending constraints, standalone hydrogen grids necessitate new infrastructures, posing economic and logistical challenges. It is imperative to mention the societal dimensions of the hydrogen transition. Public perception and acceptance of hydrogen technologies, especially in residential and mobility applications, can impact the rate of adoption and the consequent carbon emission reductions (Ricci et al. 2008). Awareness campaigns and educational initiatives highlighting the environmental and economic benefits can play a pivotal role in shaping public opinion and fostering adoption.

The literature extensively explores the nexus between renewable energy, including hydrogen and carbon emissions. It also highlights the potential of renewables in mitigating global warming and emphasizes the synergistic effects of integrated systems. Concerning hydrogen, its production methods and applications in transportation and industries have varying carbon implications, with its viability and public perception being crucial for adoption. Despite the comprehensive insights, the literature needs a focus on Saudi Arabia, and research anticipates future data regarding hydrogen energy’s impact on carbon emissions. This study seeks to bridge these notable research gaps. This helps in formulating the hypothesis for this study as follows:

  • Hypothesis 1: Blue natural gas is significantly related to carbon emissions.

  • Hypothesis 2: Green electricity is significantly related to carbon emissions.

  • Hypothesis 3: Green-associated renewable energy is significantly related to carbon emissions.

Current infrastructure of Saudi Arabia

After a stronger recovery last year, Saudi Arabia is on a path of accelerated growth due to higher prices of petroleum products. However, it is also a fact that this stronger growth is accompanied by higher energy demand. Figure 2 depicts the country’s increasing trend of energy consumption in the past few decades. This increase is due to a rapid increase in economic growth and population. However, the majority of energy demand in the country is met through nonrenewable sources (Country Analysis Executive Summary: Saudi Arabia 2021). In 2020, Saudi Arabia derived all its energy from natural gas (61%) and crude oil (39%), while the Saudi government intends to diversify the fuels used to generate electricity to maximize the quantity of crude oil available for export while reducing carbon emissions Fig. 3. Natural gas’s share of total power generation has expanded dramatically over the last decade, from 42% in 2010 to 52% today, owing to greater natural gas–fired generation capacity and higher output. Natural gas production growth slowed significantly in 2019 and 2020, which encouraged crude oil usage in the power industry, particularly during the high summer season. In the coming years, the Saudi government plans to replace crude oil burning and diesel-fired power plants with natural gas and heavy fuel oil (Country Analysis Executive Summary: Saudi Arabia 2021).

Fig. 2
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Total energy consumption of Saudi Arabia (Source: Saudi Arabia Energy Information)

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Fig. 3
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Saudi Arabia Electric Power generation by fuel (Country Analysis Executive Summary: Saudi Arabia 2021)

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Even though solar energy accounts for a small percentage of total electricity production, several utility-scale solar projects are also working. The Saudi government intends to expand solar and wind-powered electrical facilities during the next decade, but their cost advantage over fossil fuels, the Saudi government’s energy pricing policies, and adequate investment in project development will all be concerns. Since some parts of the country lack access to natural gas, the Saudi government intends to use renewable energy to offset some of the oil used for electricity generation (mostly solar).

However, the percentage of renewable energy is extremely low, showing that although the government takes many initiatives to shift towards renewable energy, there is not much progress in this sense. Saudi Arabia is among the worst-performing countries in the shift to renewables, as seen in Fig. 4. Even Russia and Indonesia progress by adding a few renewable sources to the energy mix. However, Saudi Arabia is dependent on fossil fuels.

Fig. 4
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Change in electricity mix of G20 countries (Graham 2021)

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Benefits of green hydrogen for Saudi Arabia

In conversations about the energy transition, policymakers increasingly see hydrogen as a preferable emissions-free alternative to oil, natural gas, and coal in difficult-to-abate industries. Hydrogen, on the other hand, is a transporter of energy rather than a fundamental energy source. The production cost of hydrogen is influenced by several elements, including the source and manufacturing technique. Currently, hydrogen production techniques have a large carbon impact. As a result, for hydrogen to be acknowledged as a low-carbon fuel source, its manufacturing processes must also be decarbonized. For carbon-free hydrogen synthesis, two primary technology paths are being explored. The first is water electrolysis, sometimes known as “green hydrogen”, which uses low-carbon power generating methods such as solar and wind. The second method is steam methane reforming, which uses carbon capture, sequestration, and storage (CCS) technology to capture the CO2. “Blue hydrogen” is the name given to this process.

Saudi Arabia has the distinct benefit of owning large hydrocarbon reserves, as well as a strong renewable energy potential. As a result, the cost of producing hydrogen in the country is among the lowest in the world. If international hydrogen commerce develops, this advantage might make Saudi Arabia a significant producer and low-cost worldwide marginal exporter of low-carbon hydrogen.

It is expected that the demand for hydrogen will be tenfold by 2050 in various economic sectors, including transportation and industry (Hydrogen Council 2017). The same is true for Saudi Arabia, because according to Hasan and Shabaneh (2022), with few assumptions, the Kingdom will require 18% of hydrogen energy by 2050. If this is true, Saudi Arabia must produce 12 million tons of hydrogen annually. Figure 5 shows the projections of the demand and requirements for the integration of hydrogen in the overall energy mix of Saudi Arabia. Demand for renewable energy will reach 600 (TWh) if the green-only scenario is considered, while in terms of blue only scenario country must produce “5.3 billion cubic feet”/day till 2050. With Saudi Arabia’s gas supplies and renewable energy prospects, green or blue hydrogen will be sufficient to fulfill the Kingdom’s expected hydrogen consumption. However, combining both paths may result in a more cost-effective solution.

Fig. 5
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Saudi Arabia hydrogen penetration (Hasan and Shabaneh 2022)

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Saudi Arabia’s low-cost hydrogen manufacturing base provides significant prospects as the world cuts its carbon consumption. It may either export its resources or use hydrogen locally in carbon-intensive sectors to monetize its resources. Assuming a $1.48/kg green hydrogen production cost by 2030, the delivered cost of hydrogen (including carrier conversion, transportation, and dehydrogenation) from Saudi Arabia’s western area to the Port of Rotterdam through the Suez Canal will be between $3.50 and $4.50/kg, as shown in Fig. 6. The hydrogen carrier utilized will determine the pricing (Hasan and Shabaneh 2022). This shows that the cost of importing hydrogen from Saudi Arabia will be much lower for Europe than producing it domestically. Using low-cost blue or green hydrogen to decarbonize existing ammonia and methanol facilities is thus a rapid victory for reducing Saudi Arabia’s carbon footprint. Saudi Arabia may also supply carbon-neutral goods to international markets. Other domestic energy-intensive sectors, such as steel, cement, and aluminum, might profit from these benefits. Low-carbon hydrogen can help these businesses lower the carbon content of their finished goods while protecting them when carbon rules tighten.

Fig. 6
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Delivery cost of hydrogen from Saudi Arabia (Hasan and Shabaneh 2022)

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Data and analysis

The study incorporates data on carbon emission, blue hydrogen, and green hydrogen from 2020 to 2050 for econometric purposes. The data taken is predicted data, and the description of variables and the sources of data are mentioned in Table 1. It is essential to mention that data for independent variables is divided into 5-year intervals and taken from 2020 to 2050. A simulation technique is used to fill in the missing data.

Table 1 Description of variables
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Econometric techniques

Augmented Dickey–Fuller test and Phillips–Perron test

It is essential to check the stationary of the data before applying any other test to avoid spurious regression. The current paper used the ADF test (Dickey and Fuller 1981) and the PP test (Phillips and Perron 1988) to check the unit root. The main reason for using the PP test along with the ADF test is that it is believed that the unit root rejection power of the ADF test is low; hence, to validate the decision, the PP test is also used. Combining ADF and PP tests enhances the robustness.

Pesaran et al. (2001) bounds co-integration test

After checking the presence of the unit root, it is noted that all variables are not stationary at the same level. Hence, it can be said that co-integration exists. In this situation, the application of an appropriate co-integration test is necessary. In this study, a co-integration test developed by Pesaran et al. (2001) is used.

Autoregressive distribution lag

The autoregressive distributed lag (ARDL) model, extensively utilized in econometric analyses, is designed to estimate long-run and short-run dynamics simultaneously within a unified framework. The ARDL approach offers flexibility, allowing for a mixture of stationary and non-stationary variables (Pesaran et al. 2001). One of its primary advantages is that it avoids potential pitfalls of spurious regressions when variables are integrated of different orders. Several assumptions underpin the ARDL estimator’s validity. First, there should be no serial correlation in the error terms, ensuring that the model captures all relevant information. Second, the error term should exhibit homoscedasticity, implying constant variance across observations. Additionally, the variables within the ARDL framework should not be endogenous, meaning the regressors must be free from correlation with the error term. The model also presumes that the regressors and error term have a zero conditional mean (Sims and Kydland 1977). The studied model is mentioned in Eq. (1):

$${\mathrm{CO}}_{2}={\partial }_{0}+{\partial }_{1} {\mathrm{CO}}_{2 t-1}+{\partial }_{2} {\mathrm{BlueNG}}_{t-1}+{\partial }_{3} {\mathrm{GreenELECT}}_{ t-1}+{\partial }_{4} {\mathrm{GreenRE}}_{\mathrm{t}-1}+\epsilon$$
(1)

where \({\mathrm{CO}}_{2}\) represents the carbon emission, \(\mathrm{BlueNG}\) shows the blue natural gas, and \(\mathrm{GreenELECT}\) and \(\mathrm{GreenRE}\) are green electricity and green renewable energy. \(\epsilon\) is the error term of the model.

Results

Preliminary analysis

In order to check the summary statistics of all variables, descriptive statistics are used, and results are reported in Table 2. It can be seen that the highest mean value is for carbon emission, whereas the lowest mean value is for green electricity requirements. Regarding volatility, green electricity requirement is highly volatile, whereas carbon emission is the least volatile. Additionally, to check the stationarity of the data, the augmented Dickey–Fuller (ADF) test and Phillips–Perron (PP) tests are used; Table 3 shows the results. All variables are stationary at first, suggesting that ARDL is the best approach to check the short-run and long-run associations.

Table 2 Descriptive statistics
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Table 3 Unit root
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Another primary concern is to check if co-integration exists between variables. For this purpose, the bound co-integration test is used, and Table 4 shows the results. It is evident that co-integration exists between variables because the F statistics value is higher than lower and upper bound critical values. We have employed the variance inflation factor (VIF) to estimate the multicolleanirity in the model. The outcomes of VIF are presented in Table 5, which reports that the values of all the variables are less than 10. However, there is no evidence of multicollinearity among the variables and the mean VIF is 4.47.

Table 4 Bound co-integration test
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Table 5 VIF of full model
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ARDL estimations

In view of the unit root analysis, we have found the mixed level of stationarity in the data; few of the variables are stationary at level whereas the remaining are at first difference. These findings exclude the application of simple regression analysis, such as ordinary least square (OLS), fully modified OLS, and dynamic OLS. After the stationarity analysis, it is recommended to examine the long run relationship in the model, which has been tested by cointegration analysis. In conclusion, the presence of stationarity at mixed level and existence of cointegration, we have to apply the ARDL analysis which has been opted.

In order to check the short-run and long-run association between variables, ARDL test is used, and Table 6 shows the results. It can be seen that the long-run coefficient of blue natural gas is significant and positive at a 1% level of significance. The coefficient value is 0.057, suggesting that if the blue natural gas requirement increases by 1%, the carbon emission increases by 0.057%. This means blue natural gas is adding to the carbon emission in Saudi Arabia. This result is aligned with the findings of Howarth and Jacobson (2021). As far as green electricity is concerned, it is not related to carbon emissions in the long run. However, the nexus between green renewable energy and carbon emission is negative and significant at a 5% significance level. The coefficient for green renewable energy is  − 0.015; hence, 1% increase in green renewable energy consumption reduces carbon emission by 0.015%. Habiba et al. (2022) and Meng et al. (2022) also present positive views in this regard as, according to them, renewable energy is a better alternative to reduce carbon emissions and achieve a sustainable environment.

Table 6 ARDL test
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The results regarding the short-run estimates show that blue natural gas and green electricity are not related to carbon emissions. However, green renewable energy is significantly and negatively related to carbon emission at a 1% significance level. The short-run coefficient of green renewable energy is  − 0.151, suggesting that a 1% enhancement in green renewable energy reduces carbon emission by 0.151% in the short run.

Diagnostics

After the empirical analysis, it is important to evaluate the robustness of the model through diagnostic testing which has been reported in Table 7. We have used three types of tests for autocorrelation: Durbin–Watson, ARCH LM, and Breusch-Godfrey LM. Except Durbin–Watson, both the statistics have confirmed the existence of high order autocorrelation, as the values are less than 0.05. For heteroskedasticity, we have used Cameron and Trivedi’s and Breusch Pagan tests which have confirmed the presence of heteroskedasticity in the model, as the p values are greater than 0.05. For normality, we have adopted skewness and kurtosis, which affirmed the normality in the model, as p > 0.05. Figure 7 reports the CUSUM and CUSUM square, which validates the stability of the studied model.

Table 7 Diagnostics of ARDL
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Fig. 7
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CUSUM and CUSUM square graph

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Error correction model

The results regarding the error correction model are presented in Table 8. It can be seen that the error correction term for all variables is significant and positive. This means that blue natural gas, green electricity, and green renewable energy are related to carbon emissions in the long run. This also confirms a stable long-run relationship between the independent and dependent variables.

Table 8 Error correction model
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Discussion

According to the results, blue natural gas results in an increase in carbon emissions, in case of Saudi Arabia. It is a fact that Saudi Arabia is taking environmental issues seriously, and significant efforts are being made to achieve net zero emission targets by 2030. However, all these initiatives are not only recently started but also initiating at slower pace (Alomar 2022). Generation of blue energy takes time and investment; hence, up till now, a significant reduction in carbon emission through blue natural gas is not noted. Alongside, according to Bauer et al. (2022) that blue natural gas is not as environmentally friendly as expected, because carbon is emitted in the supply chain, the production and storage of blue natural gas. Hence, net-zero targets cannot be achieved through blue energy.

Another significant study result is the negative nexus between green renewable energy and carbon emission. Saudi Arabia has developed a target of generating 50% of its energy from renewables till 2030. Different initiatives are taken because, due to countries’ geographical location, it has enormous potential to generate green energy through renewables. The country has abundant sources, including wind and sunshine; hence, generating green renewable energy is easy. The generation and combustion of green energy emit a lower amount of carbon than conventional energy (Dongliang et al. 2021; He et al. 2020; Kazi et al. 2021). However, the summary of the estimations leads to the inference that higher green renewable energy–based hydrogen plants are useful to counter the environmental challenges.

While addressing the fourth objective of the study, the comparison of theoretical and empirical investigation proposes us to conclude that a hydrogen energy which is based on blue resources are less effective to address the environmental degradation, as compared to the green source of hydrogen. Furthermore, among the green sources of hydrogen, the renewable energy–based green hydrogen is highly effective to curtail the carbon emission, specifically in Saudi Arabia.

Conclusion

Exploring diverse energy sources and their implications for carbon emissions in Saudi Arabia has yielded pivotal insights. The study’s findings indicate that blue natural gas, despite its potential as a transitional energy source, exacerbates carbon emissions within the Saudi context. This highlights the pressing need to pivot towards more sustainable energy alternatives. A vital element of the circular carbon economy (CCE), hydrogen is now viewed as an energy vector that permits energy storage. It may be utilized to create synthetic fuels, among other things (CCE). It might help countries achieve climate targets and decarbonize challenging industries, structures, and heavy-duty transportation. Countries like Japan, Australia, the USA, Germany, and Saudi Arabia are determined to speed up the establishment of a complete hydrogen economy, comparable to the successful expansion of the global liquefied natural gas (LNG) industry over the past 40 years. The Kingdom of Saudi Arabia is positioned strategically between major demand markets in Europe and Asia, where it can take advantage of the emerging hydrogen economy as a promising technique to effectively diversify its economy and become a player of strategic importance in this area as part of its Vision 2030 program and its COP26 ambitions. Contrastingly, adopting green renewable energy showcases a promising pathway, revealing a discernible inverse relationship with carbon emissions. The efficacy of hydrogen energy in carbon mitigation varies significantly based on its derivation. Blue hydrogen, anchored to natural gas, offers limited environmental benefits, emphasizing the urgency for diversification and optimization in hydrogen production strategies. On the other hand, green hydrogen, especially when derived from renewable sources, emerges as a formidable solution. Within the Saudi Arabian energy landscape, renewable energy–based green hydrogen aligns with the nation’s sustainability objectives and manifests as a potent tool for significant carbon reduction.

Furthermore, Saudi Arabia has a comparative edge in hydrogen economies due to its low level of hydrogen costs. Exporting carbon-neutral finished commodities like ammonia, steel, and cement can benefit the country in terms of global hydrogen trade and decarbonize local carbon-intensive industries. If only the resource perspective is considered, Saudi Arabia may stick to green or blue hydrogen-only programs. However, a low-cost solution may be offered by concurrently building both paths. Geographic resource distribution in Saudi Arabia shows that blue hydrogen production and export are more likely to occur in the eastern part of the country.

On the other hand, locations far from oil and gas centers, like the western region, are ideally suited for green hydrogen generation. When juxtaposing theoretical postulations with empirical data, the outcomes reiterate the indispensability of green energy sources. The distinct contrast between blue natural gas and renewable-based green hydrogen underscores the intricate nuances of energy choices and their environmental ramifications. As nations globally grapple with the dual challenges of energy security and environmental sustainability, the findings from Saudi Arabia provide valuable lessons, underscoring the paramount importance of strategic energy transitions in achieving a sustainable future.

Policy implications

The results of this study have some important policy implications. It is noted that green electricity is not proven to be beneficial for the carbon reduction targets of Saudi Arabia. The findings emphasize the need for Saudi Arabia to recalibrate its energy policy. Prioritizing the development and integration of renewable-based green hydrogen over blue natural gas can accelerate carbon mitigation efforts. Policymakers should consider incentivizing green hydrogen production and adoption, fostering a favorable environment for research, development, and deployment of sustainable energy technologies. Concurrently, measures to curtail the expansion of blue natural gas infrastructure can prevent long-term carbon-intensive lock-ins. Embracing these policy directions will align Saudi Arabia with global sustainability goals, ensuring environmental preservation and economic growth.

Limitations and future research directions

While offering key insights into energy sources and their carbon implications in Saudi Arabia, this study has its limitations. A primary constraint is the potential temporal limitation, as the research was conducted at a specific timeframe, which might not capture long-term trends or fluctuations in energy dynamics. Additionally, the study primarily focuses on broad categories of energy sources, potentially overlooking nuanced differences within each category that could impact carbon emissions. The regional specificity of the study, centered on Saudi Arabia, may limit the generalizability of the findings to other countries with differing energy infrastructures and policies. Moreover, the study should have delved deeper into the socio-economic implications of transitioning between different energy sources, an aspect crucial for holistic policy-making.

For future research, a comparative analysis involving multiple nations could provide broader insights and identify best practices. Detailed examinations of sub-categories within blue and green energy sources could elucidate more precise carbon mitigation strategies. Finally, an interdisciplinary approach, incorporating socio-economic factors, technological advancements, and policy landscapes, would present a more comprehensive understanding of the energy-carbon nexus, guiding effective, and sustainable transformations.