The role of financial and trade globalization in enhancing environmental sustainability: Evaluating the effectiveness of carbon taxation and renewable energy in EU member countries

Abstract

The study addresses the pressing issue of environmental degradation, pinpointing carbon dioxide (CO2) emissions as its primary driver, posing a threat to global environmental sustainability, including the member countries of the European Union (EU). Global warming problems persist, but previous studies have not adequately explored the factors that contribute to a reduction in carbon emissions in EU countries. The paper fills the gap by assessing the efficacy of carbon tax and eco-innovation in mitigating CO2 levels from 1994 to 2019, considering the influence of renewable energy and various aspects of globalization. The study establishes long-term associations among the indicators examined using advanced methodologies, including the cross-sectional autoregressive distributed lag approach and the Westerlund cointegration method. Notably, the results highlight that carbon taxes, eco-innovation, renewable energy, and globalization contribute to slowing environmental deterioration, and economic progress plays a role in mitigating environmental sustainability challenges in EU member states. These findings reinforce the importance of robust strategies for reducing CO2 emissions and minimizing adverse environmental impacts.