Due to their vulnerability to oil price shocks, oil-exporting economies are subject to more fluctuations than developed economies. In this paper, we investigate whether transitioning to net-zero emissions would further exacerbate this macroeconomic volatility. Using an enhanced environmental dynamic stochastic general equilibrium model calibrated to Saudi Arabia’s economy, we constrain national emissions by setting either an absolute cap or a cap on the carbon intensity of the non-oil GDP.
