Can environmental tax promote renewable energy consumption? — An empirical study from the typical countries along the Belt and Road

Abstract

This paper explores the effects of environmental tax on renewable energy consumption. Fifteen typical countries along the Belt and Road are selected to build panel autoregressive distributed lag model based on the data of 1998–2019 years. According to pooled mean group estimator, the short-term impact of environmental tax on renewable energy consumption in these countries is negative. In the long run, for 1% increase in environmental tax, renewable energy consumption will increase by 1.201%. Dumitrescu-Hurlin panel causality test confirms the existence of bidirectional causality between environmental tax and renewable energy consumption. For the canonical cointegration regression approach, 1% increase in environmental tax, the share of renewable energy consumption in the final energy will increase by 0.021%. The robustness of the long-term relationship is tested by fully modified ordinary least squares and dynamic ordinary least squares. Linearity tests reveal the nonlinear impact of environmental tax on renewable energy consumption. The paths of environmental tax to improve environmental quality are put forward.