How do transportation-based environmental taxation and globalization contribute to ecological sustainability?

Abstract

Environmental taxation strategies are recognized as powerful instruments for enhancing environmental quality through emissions reduction globally; however, the ecological effects of green taxes in the transportation sector (ETT) have been largely overlooked. To fill this literature void, we undertake a novel attempt to evaluate the effectiveness of ETT and globalization in attaining ecological sustainability in the presence of energy intensity and real GDP per capita. We employ second-generation Westerlund cointegration, pooled mean group autoregressive distributed lag and fully modified ordinary least squares econometric strategies on data from the Group of Seven (G7) countries from 1994 through 2016. We found long-term stability among the under-analysis variables. Notably, we revealed that while ETT shows a neutral effect in the short run, it promotes ecological sustainability in the long run. Likewise, increased globalization is also uncovered to foster ecological sustainability from the long-term perspective, though its neutral impact existed in the short term. In addition, energy intensity is found to increase ecological footprint consumption (EFCO); nevertheless, the phenomenon of the Environmental Kuznets Curve is valid for the G7 countries, suggesting a long-term ecological recovery in response to higher economic growth. Concerning causality directions, all variables established a bidirectional relationship with EFCO except for globalization, displaying a unidirectional link stemming from globalization to EFCO. From the normative policy perspective, ETT fiscal policy toolbox can prove a breakthrough instrument in mitigating environmental emissions, contributing to ecological quality. Also, in the face of enhanced globalization, exchanging green investment endeavors and trade in green and environmentally friendly products can achieve the ecological sustainability agenda of sustainable development.