Economic policy uncertainty and CO2 emissions: a comparative analysis of developed and developing nations.

Abstract

Energy consumption is essential for economic growth; however, its consumption also increases CO2 emissions, which contributes to climate change and environmental degradation. However, both environmental sustainability and sustainable development can be achieved by clean energy (CE) consumption since it consists of noncarbohydrates energy sources that seldom or do not cause CO2 emissions. Therefore, the current study considers economic policy uncertainty (EPU) to study the impacts of CE on CO2 emissions that control economic growth (GDP) and urbanization in both developed and developing nations. The findings from ARDL show that EPU significantly increases CO2 emissions in both the long and short run for both developing and developed nations. While CE and urbanization contribute to improving environmental quality. Economic growth increases CO2 emissions. The results could have a few significant practical impacts on economic policies across which policymakers could try to reduce policy uncertainty by participating in and organizing international treaties and summits. Additionally, international organizations could organize programs to reduce EPU. The role of political stability can be effective in reducing EPU in these countries. Moreover, these nations should introduce environmentally friendly innovation and clean energy technologies and give tax releases on the import and use of CE products while increasing R&D budgets.