Abstract
This article examines the impact of carbon pricing on international competitiveness for Azerbaijan, utilizing different cointegration methods such as, ARDLBT, CCR, DOLS, and FMOLS to the data spanning from 2000 to 2019. The results of the various cointegration approaches are in line with each other. The estimation results revealed that domestic crude oil price as a proxy of carbon pricing has a positive and significant impact on the real effective exchange rate in Azerbaijan. This implies that a rise in domestic crude oil price raises the real effective exchange rate (appreciation of national currency). An increase in real effective exchange rate indicates a loss in international competitiveness. The study concludes that the Azerbaijani policymakers should implement carbon pricing measures (implicit) to decrease CO2emissions fromenergy heavy industrieswithout harming the country's international competitiveness, as well as use more renewable energy in order to prevent higher pollution effects of fossil fuels.
Highlights
Environmental sustainability is one of the three dimensions of sustainable development
The link between carbon pricing policies and international competitiveness is investigated in this study
Our findings show that there is a cointegration relationship between the variables for Azerbaijan
Summary
Environmental sustainability is one of the three dimensions of sustainable development. Seventh Millennium Development Goal is “ensuring environmental sustainability” that imposes specific responsibilities on government, institutions, societies, policymakers and individuals (UN 2015). Since these responsibilities are global priorities, many researches attempted to find economical and energy-efficient methods to meet Sustainable Development Goals (Delanka-Pedige et al 2020). Greenhouse gases produced by man-made activities, such as burning fossil fuels, absorb heat and create global warming, leading to changes in the climate system which results to the increase in global average temperature. Undebatable, this is one of the most pressing issues confronting humanity today. In order to reach environmental sustainability around the world in terms of greenhouse gases, the Kyoto protocol was accepted in 1997 by many governments over the world, which puts commitment on developed countries to reduce emissions (Mikayilov et al 2018)
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