Natural resources, environmental policies and renewable energy resources for production-based emissions: OECD economies evidence

Abstract

Economic growth and environmental degradation are consistently increasing in developed economies due to expansion in the industrial sector and excessive use of natural resources. As a result, production-based carbon emissions increased during the last three decades, for which scholars have recommended several remedial measures. This study investigates the importance of natural resources and environmental regulations in attaining environmental sustainability via reducing production-based emissions in 21 OECD economies. Besides, the role of renewable electricity output and economic growth is also considered. This study uses several cointegration tests and concludes that the long-run association between the variables existed between 1990 and 2020. Due to the non-linearity issue, this study uses the method of moment quantile regression, which indicates natural resources and economic growth as the primary factor of production-based emission. However, stringent environmental policies increased environmental tax, and improved renewable electricity significantly reduced production-based emissions, leading to environmental sustainability. This study uses parametric estimation techniques to authenticate the empirical results and bidirectional causal connections between the variables. This study suggests further strengthening environmental management via stringent environmental policy, imposing an enhanced environmental tax on extensive carbon sectors, and investing in renewable electricity generation.