The role of environmental taxes and stringent environmental policies in attaining the environmental quality: Evidence from OECD and non-OECD countries

Abstract

Numerous economies focus on attaining a clean environment by applying environmental policies and green technology. This study examined the impact of GDP growth, non-renewable, technological change, environmental tax, and strict regulations on an ecological footprint for the Organization for Economic Cooperation and Development (OECD) and Non-OECD (not members of OECD) economies from 1990 to 2015. This analysis applied the Cross-Sectionally Augmented Auto-Regressive Distributed Lag (CS-ARDL) to identify the role of GDP, and environmental taxes, with selected control factors on ecological degradation. These CS-ARDL techniques resolve the issues of slope heterogeneity, endogeneity, and cross-sectional dependence. For robustness, this study used Augmented Mean Group (AMG), and Common Correlated Effect Mean Group (CCEMG) tests to check the long-run association between variables. The empirical findings of CS-ARDL have confirmed that environmental taxes, stringent environmental policies, and ecological innovation significantly improve environmental quality in OECD compared to the Non-OECD countries. The D-H panel Granger causality test results show the unidirectional causality moving from environmental tax to ecological footprint, which referred to the “green dividend” hypothesis of minimizing environmental degradation. Using AMG and CCEMG tests for Robustness checks indicates that environmental taxes and tight environmental policy can effectively improve the environment’s quality in both regions. Hence, environmental protection awareness is forcing policymakers to minimize the impact of environmental degradation to achieve sustainable growth.

Nexus between Innovation–Openness–Natural Resources–Environmental Quality in N-11 Countries: What Is the Role of Environmental Tax?

“…Studies have shown that higher taxes on carbon emissions lead to a decrease in the use of fossil fuels and a reduction in CO 2 emissions, which can contribute to addressing climate change [83]. Imposing taxes on activities that contribute to the ecological footprint, such as resource exploitation and pollution, could encourage the adoption of sustainable practices and drive investments in renewable energy, energy efficiency, and waste reduction technology [84]. Moreover, revenue generated from environmental taxes can support initiatives for environmental conservation, biodiversity preservation, and sustainable development, ultimately reducing the ecological footprint (OECD, 2019).…”

Bio-based agricultural products: a sustainable alternative to agrochemicals for promoting a circular economy

“…The model was found to have benefited financially from environmental tax money. 1 unit change in gross domestic product (GDP) will increase environmental quality by 0.52 units 98 . In other words, the amount of money collected from environmental taxes is a key indicator of economic growth due to the fact that these taxes have a positive correlation with the growth of the economy 99 .…”

“…1 unit change in gross domestic product (GDP) will increase environmental quality by 0.52 units. 98 In other words, the amount of money collected from environmental taxes is a key indicator of economic growth due to the fact that these taxes have a positive correlation with the growth of the economy. 99 In the EU, municipal garbage recycling rates were found to be high, and this had a positive impact on GDP per capita.…”

From crisis to resilience: strengthening climate action in OECD countries through environmental policy and energy transition

“…Among these gases, carbon dioxide emissions are identified as the predominant factor contributing to anthropogenic GHG emissions. Previous studies have frequently employed CO 2 emissions as a key indicator to assess the extent of environmental catastrophes (Abid et al 2022 ; Chen et al 2022 ). We have used CO 2 as a representative of climate change, and the data for OECD countries is extracted from WDI ( 2021 ).…”

“…The pathway to effectively address environmental crises relies heavily on the policy objectives set forth by various governments and international authorities and their strategic policy decisions, which play a crucial role in shaping environmental outcomes (Dechezleprêtre et al 2011 ; Wenbo and Yan 2018 ). By adhering to these strategies, nations can effectively curb harmful emissions and enhance energy efficiency, fostering sustainable development and resilience in the face of global environmental challenges (Chen et al 2022 ). Hille et al ( 2020 ) posited that to maximize the advantages derived from environmental policies; it is imperative to implement an approach over a prolonged duration, thereby demonstrating a commendable level of regulatory consistency in the realm of environmental governance.…”