Abstract
This paper uses a quantile fixed-effect panel data approach to investigate how environmental policy stringency affects CO2 emissions in a set of 32 countries from 1990 to 2015, using OECD data. This approach allows us to identify the asymmetric impact of policy stringency on emissions, considering the emission level recorded in each analysed country. More precisely, we posit that the effectiveness of environmental regulations and policies is influenced by the air pollution level. Our results show that an increase in policy stringency has a negative impact on emissions and that environmental stringency has a more powerful impact in the countries with lower levels of carbon emissions. In addition, we show that policy stringency measures only became effective after the implementation of the Kyoto agreement, whereas the policy stringency effect is stronger for EU countries at high risk of missing the 20-20-20 target in terms of greenhouse gas emissions. Lastly, policy implications refer to the need to adapt policy stringency measures to emission levels to increase their effectiveness. At the same time, the setting up of emission targets determines policymakers to be more engaged in the fight against carbon emissions.
Highlights
Environmental degradation in general, and the increase in greenhouse gas emissions in particular, requires urgent action and policy measures to fight against global warming
In line with previous papers assessing the impact of environmental regulations on air pollution levels (e.g. Albulescu et al 2019, 2020; Ma et al 2018; Niedertscheider et al 2018; Sapkota and Bastola 2017; Wenbo and Yan 2018; Zhao et al 2015), we focus on the CO 2 emissions
The general equation we tested is: co2it = α0 + α1 epsiit−1 + α2 Zit−1 + μi + γt + εit, where co2it are the carbon emissions of the country i in the year t; α0 represents the intercept; epsiit−1 is the environmental policy stringency index; Zit−1 is the vector of control variables represented by GDP per capita, foreign direct investment (FDI), energy use and the renewable energy consumption (% of total final energy consumption); μi are the time-invariant firm specific effects, γt are the time-specific effects and εit are the error terms
Summary
Environmental degradation in general, and the increase in greenhouse gas emissions in particular, requires urgent action and policy measures to fight against global warming. 2 promoting green innovation and regulating emissions through carbon pricing are the two fundamental driving forces of climate change policies on carbon abatement Regarding the environmental policies and regulations of carbon emissions, environmental taxes and environmental policy stringency represent the main instruments used by authorities to fight against climate change (Wolde-Rufael and Mulat-Weldemeskel 2021). A portion of these works (Wang et al 2020a; Wolde-Rufael and Mulat-Weldemeskel 2021) investigate the effectiveness of environmental policy stringency in reducing CO2 emissions. The OECD computes a specific environmental policy stringency index (EPSI), combining market-based (taxation, trading schemes, deposit and refund schemes, etc.) with non-market-based policies (standards and limitations, research and development expenditures, etc.). While Wang et al
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