What is the role of fiscal policy in reducing CO2 emissions? Evidence from different income groups

BackgroundNuclear energy carries the least environmental effects compared to fossil fuels and most other renewable energy sources. Therefore, nuclear energy transition (NET) would reduce pollution emissions. The present study investigates the role of the NET on CO2 emissions and tests the environmental Kuznets curve (EKC) in the 28 nuclear electricity-producing countries from 1996–2019.MethodsAlong with a focus on the whole panel, countries are divided into three income groups using the World Bank classification, i.e., three Lower-Middle-Income (LMI), eight Upper-Middle-Income (UMI), and 17 High-Income (HI) countries. The cross-sectional dependence panel data estimation techniques are applied for the long and short run analyses.ResultsIn the long run, the EKC is corroborated in HI countries’ panel with estimated positive and negative coefficients of economic growth and its square variable. The Netherlands, Sweden, Switzerland, and the USA are found in the 2nd stage of the EKC. However, the remaining HI economies are facing 1st phase of the EKC. Moreover, economic growth has a monotonic positive effect on CO2 emissions in LMI and UMI economies. NET reduces CO2 emissions in UMI and HI economies. On the other hand, NET has an insignificant effect on CO2 emissions in LMI economies. In the short run, the EKC is validated and NET has a negative effect on CO2 emissions in HI countries and the whole panel. However, NET could not affect CO2 emissions in LMI and UMI countries. Based on the long-run results, we recommend enhancing nuclear energy transition in UMI and HI economies to reduce CO2 emissions. In addition, the rest of the world should also build capacity for the nuclear energy transition to save the world from global warming.

The most significant reduction in environmental quality is thought to have occurred in low-income countries, while low environmental degradation occurred in those high-income countries. Using the cluster purposive sampling technique, countries from 5 continents were examined to see if they had complete data and represented three categories. Seventy-eight countries were found to meet these requirements and were then used as research samples from 2015 to 2019. The Data Panel Regression technique was used to analyses the data. This study is expected to be able to produce policies in the form of a sustainable environmental management model that continues to support economic growth. This study proved that the Environmental Kuznets Curve (EKC) phenomenon applies from 2015 to 2019 in high-income countries, and population growth rates have a significant negative impact on Carbon Dioxide (CO2) emissions. This means that the more prosperous a country, the less the environmental degradation, while in low-income countries, carbon emissions increase when economic growth increases. In developing countries, as the population increases, environmental degradation increases, while in low-income countries the amount of carbon emissions is affected by economic growth and population. Some compensate and subsidies low-income countries which are able to care for their environment.

There is a body of research that focuses on the examination of long-run relations between energy–environment–economic growth, and there is also a new type of recent research that focuses on the effects of monetary and fiscal economic policies on the environment. There is a research gap that exists due to omitting the effects of technology and energy policies, and this paper addresses this gap, in addition to merging both fields mentioned above, by including the asymmetric effects of fiscal and monetary policies. To explore the relations between fossil fuel and renewable energies, environmental pollution, and economic growth, in addition to including the roles of energy, technology, monetary, and fiscal policies, this paper employs novel NBARDL and NBARDL Granger Causality methods for yearly data assessments in the USA. The empirical findings of the paper point to the asymmetric impacts of monetary and fiscal policies in the short- and long-run. Interestingly, both contractionary and expansionary fiscal policies lead to higher CO2 emissions. Contractionary monetary policies exert a downward pressure on CO2 emissions, and if expansionary, the monetary policy causes environmental degradation. As an important policy, the energy policy emerges as a potent tool for reducing carbon emissions through not only renewable energy, but as a greater impact through energy efficiency and technology. Therefore, this paper highlights the importance of technology policies exhibiting varying relationships with environmental pollution, featuring unidirectional or bidirectional causality patterns. Renewable energy, energy efficiency combined with adequate technology, and energy policies are determined to have pivotal roles in CO2 emissions outcomes. Such policies should focus on cleaner energy sources accompanied by energy efficiency technologies in the USA to curtail environmental impacts; technology policies are vital in fostering innovations and encouraging cleaner technologies. The policy recommendations include an effective combination of monetary, fiscal, technology, and energy policies, backed by a strong commitment to achieving energy efficiency and renewable energy to mitigate environmental pollution and to contribute to sustainable development.

Is the environmental Kuznets curve hypothesis valid for all countries? Fresh insights from bias-corrected dynamic panel data models.

This study examines foreign aid effectiveness in poverty reduction in Africa with focus on the role of regional fiscal policy on education and health. The study employs panel dynamic ordinary least squares (DOLS) estimation technique and covers the period 1980-2017. The results reveal that foreign aid augmented with effective fiscal policy on education significantly improves the income level in all the regions except Central Africa, and consumption in the Western and Central regions. When augmented with effective fiscal policy on health foreign aid enhances households’ income in West and Central Africa and consumption in West and Southern regions. Furthermore, foreign aid augmented with effective fiscal policy in education (health) reduces poverty headcount in the West and Central (in all regions except Central) regions of Africa. The study concludes that foreign aid augmented with fiscal policy on education improves income in all regions except Central Africa; and West and East Africa when augmented with health expenditure. To sustain the effectiveness of foreign aid in Africa there is the need to improve governments’ allocation to the health and education sectors to deepen households’ income.

Effect of urbanization and international trade on CO2 emissions across 65 belt and road initiative countries

India is the second most populous country in the world and stood at seventh rank in a major climate risk index in 2019, which is a grave concern for the Indian government, policymakers and environmentalists. Therefore, the present study examines the role of fiscal policy and monetary policy instruments along with select macroeconomic variables on carbon emission in India over the period 1971–2019 in the non‐linear framework. The outcome of the study reveals that the impact of fiscal and monetary policy instruments on carbon emission is asymmetric in nature. In addition, the positive and negative shocks in fiscal and monetary policy instruments have a positive and negative impact on carbon emissions, respectively. Based on the coefficients’ magnitude, the role of fiscal policy instruments has a more prominent effect on carbon emissions than monetary policy instruments. The findings of the study imply that the Indian government is required to implement green fiscal and monetary policies. Use fiscal policy to implement a ‘green tax ratio’ and a ‘green subsidy programme’ for manufacturers and investors to reduce CO2 emissions. A ‘green lending programme’ should be introduced for commercial banks by implementing monetary policy via the central bank.

Green fiscal policy has emerged as a crucial tool for promoting sustainable development in developing countries. The “National Comprehensive Demonstration City of Energy Conservation and Emission Reduction Fiscal Policy” (ECER fiscal policy) launched by the Chinese government in 2011 is a typical green fiscal policy, but its effect remains to be evaluated. This study measures the green total factor carbon efficiency (GTFCE) of Chinese cities from 2004 to 2019 and employs a time-varying difference-in-differences (DID) model to assess the causal effect of the ECER fiscal policy on GTFCE. The findings suggest that the ECER fiscal policy, combining financial incentives and environmental regulation attributes, can effectively enhance GTFCE in pilot cities. Mechanism analysis demonstrates that the low-carbon effect of the ECER fiscal policy is mainly through optimizing resource allocation and facilitating green innovation. Heterogeneity analysis further highlights the policy’s amplified impact in cities with officials under 54 years old and higher environmental attention from local governments. These findings offer valuable insights for policymakers in developing countries regarding fiscal policy optimization in advancing carbon reduction.

Social capital, household income and carbon dioxide emissions: A multicountry analysis

Forest functions as a provider of environmental services and non-timber forest products (NTFP) should be considered in the fiscal transfer mechanism of central and local governments. Thus, it is necessary to shift the direction of fiscal policy in the forestry sector from timber revenue to green fiscal policy. The preparation of the green fiscal policy framework requires a series of stages analysis: policy instruments, stakeholder and the role of scientists in the formulation of green fiscal policy. The objective of this study is to analyze the role and influence of scientists in green fiscal policy making. Scientists are expected to be a bridge so that the concept of green fiscal funding policy can be formulated and implemented based on scientific theories. This research was conducted in Jambi Province. Data collection and information was done through interview, observation and literature study. Data were analyzed using scientist classification matrix that influenced the policy making process based on the level of independence and its influence. The results showed that the role and position of scientists in green fiscal policy making is divided into the honest broker of policy alternative and advocate issues,. The influence of scientists is limited to the preparation of academic texts.

This study aims to examine the Environmental Kuznets Curve (EKC) hypothesis in the case of 100 developed and developing nations by taking into account the role of institutional quality (IQ). Using generalized method of moments (GMM) estimators, we find an inverted U-shaped relationship between economic growth and carbon dioxide (CO2) emissions only in the developed world but not in the developing nations. It is also revealed that control of corruption plays a vital role in reducing CO2 emissions in high income countries. Furthermore, rule of law is found to have a beneficial effect on the environment in all countries except for low income countries. Overall, our results confirm the importance of IQ in reducing CO2 emissions. Additionally, foreign direct investment contributes to CO2 reduction in rich countries while deteriorates the environmental quality in developing nations. Trade openness was shown to exert a positive impact on environmental quality in developing countries. These findings can be of great importance to policy makers of different income groups in designing appropriate economic and environmental policies toward the dual goals of high growth and low pollution.

This paper examines the effects of fiscal and monetary policies on the real sector under globalization by using the dynamic panel System-Generalized Method of Moments estimator technique with a sample of 79 countries during the 1998–2018 period. The paper primarily aimed to evaluate the roles of fiscal and monetary policies on the real sector by considering aspects of globalization. The results demonstrate that globalization has significantly distorted the role of expansionary fiscal policy on the real sector. Further, the role of monetary policy on the real sector has remained reliable under globalization in developing countries but not in developed countries. Moreover, the effects of economic globalization through trade and financial liberalization on the reliability of fiscal and monetary policies were also investigated. In accordance with the effects of globalization, trade and financial liberalization were found to distort the role of fiscal policy on the real sector; however, under trade liberalization, monetary policy was more effective for the industrial and service sectors than fiscal policy.

Rule of law and CO2 emissions: A comparative analysis across 65 belt and road initiative(BRI) countries

ABSTRACT: Several studies have used various datasets and methodologies to analyze the relationship between bilateral trade and income convergence among trading partners. However, most studies have not paid attention to the effect that income levels and nature of bilateral trade have on the speed of income convergence. In this paper, we argue that the income levels of trading partners and the nature of bilateral trade play important role in the relationship between bilateral trade and international income convergence. To account for the effect of income levels of trading partners, this paper presents an approach that explicitly accounts for bilateral trade among high-income (OECD) countries, bilateral trade between high-income and low-income (SSA) countries, and bilateral trade among low-income (SSA) countries. We also used total trade data for 25 OECD countries and 30 Sub-Saharan African countries over the period 1980-2018 to avoid the potential bias for selecting certain countries based on arbitrary percentage of trade relationship. We used the 2SLS estimations technique to avoid endogeneity problems due to the nature of the dataset. The paper finds that the bilateral trade-income convergence relationship for OECD to SSA is the strongest. This result throws light on the claim that the nature of bilateral trade between high-income and low-income countries promotes one directional knowledge spillover from high-income to low-income countries which enables low-income countries to adopt new technologies and grow faster than their high-income counterparts. Also, bilateral trade among OECD countries, which mostly comprises of differentiated products, promotes descent income convergence among them. However, bilateral trade among SSA countries has the least effect on income convergence. Findings of the study have important implications for bilateral trade among low-income countries and between low income and high income countries. First, if SSA countries want to develop and catch up with their rich counterparts, they should continue to promote free trade with high income countries by dismantling remaining protection policies. Second, the African Continental Free Trade Area's (AfCFTA) efforts to boost the manufacturing sector through industrialization is in the right direction to promote the production of more differentiated products in Africa which will create growth in income for member countries as they trade more. Finally, there is the need for SSA countries to increase investment rates and improve human capital accumulation to enable them to accelerate the adoption of new technologies and grow faster than their high-income counterparts, while bridging the income gap between them through trade.

The pollutant and carbon emissions reduction synergistic effect of green fiscal policy: Evidence from China