The Impact of Technology and Government Policies on OECD Carbon Dioxide Emissions

Abstract

This study investigated the effect of technology and government policies on carbon dioxide (CO2) emissions in 36 Organisation for Economic Co-operation and Development (OECD) countries from 1994 to 2015. This empirical investigation uses econometric models, such as panel quantile regression and ordinary least squares (OLS). The research uses the method proposed by Lin and Ng in 2015 to deal with parameter heterogeneity across countries that identified two separate groups. The empirical results indicated that Gross Domestic Product (GDP), fossil fuel consumption, industrialisation and taxation to GDP intensify CO2 emissions. In contrast, urbanisation (% of the total population), environmental patents, and environmental tax as a percentage of total tax reduce CO2 gas emissions. Estimates with homogeneity preserve the signs of the parameters but reveal substantial differences in intensity and that environmental tax revenues (as % of GDP and % of tax) are only statistically significant for our studied group 1. The conclusions of this study have important policy implications. The effect of industrialisation on environmental degradation is an observable fact. When the country reaches the allowable thresholds, it needs to maximize energy consumption. Policymakers should design policies that help them to promote environmentally sustainable economic growth by imposing and accumulating environmental taxes. In addition, environmental taxes, the discharge system and credit could support the modification of in-industrial structures and modes of economic growth. Policymakers should also use policies that encourage trade in nuclear-generated electricity to neighbouring OECD countries.