This paper presents possible Net Zero Emissions (NZE) trajectories for Saudi Arabia at horizon 2060. It factors-in contrasted international oil price scenarios and their influence on the country’s economic performance during the net zero transition. We use a hybrid forward-looking general equilibrium model of the Saudi economy. The Domestic NZE policy is implemented through domestic energy price reforms and annual caps on CO2 emissions. If the international oil price is high, price reforms alone may bring emission 25% below the baseline in 2060 thanks to fuel switch and energy conservation. But reaching net zero emissions requires deeper transformation and spending massively in carbon capture technologies, including direct air capture. As a result, the energy system costs as share of GDP increases. We see that lower oil prices increase the domestic price of carbon needed to reach net zero because it reduces the opportunity cost of using fossil fuels domestically. We establish that, in the long run, the effect of the domestic implementation of NZE on aggregate consumption is comparable to the effect of a $30 reduction in oil prices. Revenue of clean hydrogen exports are significant only if we assume very high international hydrogen prices, and if very costly investments in production capacity are realized. The results also show that if the country aims to preserve a large current account surplus, oil prices have a greater negative effect on aggregate consumption than the domestic decarbonization policy has. We also find that in the case of lower prices, terms of trade adjustments can stimulate non-oil exports in the medium run, however, on the longer run, the crowding out effect prevail, harming to non-oil sector output.
