Is environmental sustainability transmissible? Transportation-based environmental taxation spillovers for sustainable development.

Abstract

Environmental sustainability investigation has been a hotly debated topic of the modern literature; however, past studies have primarily overlooked its transmissibility or spillover outreach across economies. Herein, we investigate the novel aspect of whether transportation-based environmental taxation spatially induces spillover impacts across Italy, Germany, and France over the 1994-2020 period by employing a simultaneous spatial equation with multi-country dynamic stochastic general equilibrium modeling (DSGEM) framework. Transportation-based environmental taxation of the domestic economy negatively impacts its own investment and consumption, while it impacts the economy of neighboring economies positively. Change in output and investment in the domestic economy can be well explained by the environmental volatility of the domestic economy, whereas the environmental volatility of neighboring economies does not contribute much to explain the change in investment and output of the domestic economy. Volatility in pollution discharge occurs more by environmental volatility in the neighboring economy than in the domestic economy, and validating that environmental sustainability is transmissible across regions and economies. It urgently calls for environmental protection policies integrated and coordinated across the countries and regions to spread and capitalize on environmentally and economically favorable and sustainable effects globally. Achieving the spatially transmitted positive environmental and economic outcomes would help strengthen the Sustainable Development Goals (SDG), with a particular focus on Climate Action (SDG13), Sustainable Production and Consumption (SDG12), and Affordable and Sustainable Energy for All (SDG7).