Abstract
The primary objective of this study is to examine the effects of sectoral value-added on greenhouse gas emissions in the European Union from 1995 to 2020. The mediating and moderating role of financial development and environmental regulations respectively have been empirically investigated in exploring the relationship of sectoral value-added with greenhouse gas emissions. Our results specified the contribution of an aggressive agrarian strategy to an increase in greenhouse gas emissions associated with agriculture value-added. While investigating manufacturing value-added, the study illustrates a reduction in greenhouse gas emissions due to the use of renewable energy sources, improved energy efficiency, and technological advancements in the manufacturing sector. The services value-added restrained the greenhouse gas emissions on a standalone basis; however, the mediating role of financial development proliferated greenhouse gas emissions that lead to financial enablement to ecologically inauspicious services sectors. Correspondingly, environmental regulations approximated through environmental taxes positively moderated the effect of services valued added on greenhouse gas emissions. This demonstrates that environmental tax alone is not an efficient regulatory tool to drive ecological improvement. These findings are robust to alternative proxy measures and provide an integrated framework for policymakers to rationalize agricultural and service industry processes.
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