Effectiveness of environmental protection expenditures and resource tax policy in the Netherland's load capacity factor: Do government effectiveness and renewable energy matter? Evidence from Fourier augmented ARDL

Abstract

Several environmental policy actions are taken nationally and internationally to tackle environmental problems and ensure environmental sustainability. In this context, the importance of public economic instruments emerges. The Netherlands follows a stricter environmental protection expenditure and resource tax policy than the OECD and EU countries. Starting from this perspective, we investigate the effect of environmental protection expenditures, resource tax, government effectiveness, economic growth, and renewable energy on the load capacity factor in the Netherlands using data from 1996 to 2021. Methodologically, a Fourier-based econometric methodology is followed. The findings imply that environmental protection expenditures and resource tax implemented in the Netherlands are effective policies for ensuring environmental sustainability. Similarly, renewable energy policies and the level of government effectiveness contribute positively to environmental sustainability. Finally, economic growth negatively affects environmental sustainability by increasing environmental pressure. We subjected the findings to robustness analysis using Fourier-based methods and found that the findings were valid. To maximize the benefits of policies (resource tax and environmental protection expenditure), policymakers should make commitments to the use of the revenue generated and center efforts to build biocapacity on green technological innovations.