The impact trilemma of energy prices, taxation, and population on industrial and residential greenhouse gas emissions in Europe.

Abstract

As a major source of pollution and the cause of climate change, greenhouse gas emissions are attracting the attention of scholars, policymakers, and governors in Europe and the world. This article assesses the impact of population, energy taxes, and energy prices on greenhouse gas emissions from the residential and industrial energy consumption in Europe. The paper establishes a theoretical framework that predicts that rising energy prices and increased energy taxes will reduce residential and industrial GHG emissions. According to this framework, it is expected that the labor force will have an impact on industrial greenhouse gas emissions depending on wages elasticity. Between 2007 and 2017, panel data from 21 European countries were used to test the proposed hypothesis. First, a complete sample test was conducted. The results confirmed the proposed hypothesis. In addition, it was found that the size of the population increased residential greenhouse gas emissions, while the urbanization process reduced these emissions. Next, the sample was divided according to the economic development level. The split sample analysis shows the regional heterogeneity of population factors and energy costs impacts on GHG emissions. Finally, the time-varying coefficient test indicates that during the study period, the negative impact of urbanization has decreased over time, while the positive impact of industrial production on greenhouse gas emissions has increased. We believe this article will contribute to the formulation of environmental policies and provide additional insights for environmentally sustainable development.