The effectiveness of environmental protection policies on greenhouse gas emissions

Abstract

In Canada, greenhouse gas (GHG) emissions continue to remain high despite the federal government's commitment to reduce GHG emissions. Environmental policy across Canadian provinces has largely lacked consistency with some provinces implementing targeted policy such as carbon taxes while others have strongly resisted the federal government's attempts to encourage such policy. This study examines the impact of environmental policy on GHG gas emissions across Canadian provinces with policy uniquely measured by public and business sector spending on environmental protection as well as notable province-specific policies. An extended STIRPAT model is specified with the inclusion of proxies for environmental policy using panel data from Canada's ten provinces from 1995 to 2019. The cointegration and the error correction modelling approaches are employed to estimate the non-stationary panel data. A pooled mean group estimation is applied to provide short run and long run coefficients. The findings indicate that although per capita GDP is the main driver of GHG emissions in Canada, environmental policy has a significant mitigating effect, as shown by the negative association between emissions and private and public sector spending on environmental protection in the long run. Furthermore, provinces with targeted policies, such as Ontario's coal phase-out and British Columbia's carbon tax, experienced significant emissions reductions. The theoretical implication is the successful addition of policy variables to the STIRPAT model, providing the model a new application for future research.