The water–energy nexus in Saudi Arabia’s agriculture sector: Water demand forecasts and policy implications

Abstract

Agriculture in semi-arid Saudi Arabia relies heavily on non-renewable groundwater resources to support food security. This study estimates agricultural water demand using the Autoregressive Distributed Lag (ARDL) model with annual data for 1992–2024 and projects alternative demand scenarios through 2050. Fully Modified Least Squares, Dynamic Ordinary Least Squares, and Autometrics general-to-specific modeling approach are employed as robustness checks. Agricultural income, groundwater pumping costs (proxied by agricultural electricity tariffs), and rainfall are identified as the primary determinants of agricultural water demand in Saudi Arabia. The estimation results indicate that, in the absence of additional policy interventions, agricultural water demand is projected to increase by 54%, reaching 17.8 billion cubic meters (bcm) by 2050 under a median precipitation scenario. This growth reflects both baseline trends and additional water requirements associated with the Saudi Green Initiative (SGI). Under the median precipitation scenario, the associated energy demand for groundwater extraction would increase by 37%, reaching 19.5 TWh by 2050. The results indicate that the long-run elasticity of water demand with respect to groundwater pumping costs is −0.22, whereas the estimated impact of policy measures, such as banning water-intensive crops, is larger. The findings suggest that bans on water-intensive crops have produced substantial and persistent reductions in agricultural water demand, highlighting the effectiveness of direct regulatory measures when duly enforced. The results further suggest that higher agricultural electricity tariffs could complement existing regulatory measures by encouraging farmers to adopt more water-efficient production practices, thereby slowing groundwater depletion without significantly affecting agricultural output.