Promoting green taxation and sustainable energy transition for low-carbon development

Abstract

Since there is a scientific consensus that the energy sector has brought the planet to the tipping point of climate change, transitioning to sustainable energy sources is inevitable to halt foreseeable climatic adversities. This study looks at how promoting green taxation and sustainable energy transition affected the G7 nations’ goal of low-carbon development between 1994 and 2020. This study used Generalized Least Squares Random Effects Regression and Driscoll-Kraay Standard Errors-based Least Sqaures approaches for empirical analysis. The latter approach accounts for cross-sectional dependence, heteroscedasticity, and autocorrelation to provide robust empirical outcomes. The empirical results are as follows: Firstly, through lowering CO₂ intensity and greenhouse gas emissions, the environmental tax revenues have enhanced the condition of the environment. The total tax revenues linked to the environment had a greater overall impact than the tax revenues related to the energy industry. Furthermore, compared to CO₂ intensity, both of the environmental tax revenue factors contributed considerably more to greenhouse gas emissions. Second, the sustainable energy transition helped to lower greenhouse gas and CO₂ intensity. Among covariates, international trade was supportive of low-carbon development, but industrialization and GDP per capita did the opposite. The panel bootstrap causality revealed a unidirectional causal connection from all independent variables, except foreign direct investment, to CO₂ intensity and greenhouse gas emissions. These results demonstrated that the G7 nations’ environmental policies supported their commitment to achieving low-carbon development goals. In this respect, the G7 nations’ environmental emission reduction efforts benefited more from the overall environmental tax revenues. To secure the industrial emissions reduction for a future with net-zero carbon emissions, it is thus advised to continue using policies that price environmental emissions, such as the carbon taxation regulations. Additionally, plans for the sustainable energy transition that includes a quick rise in renewable energy sources in the overall energy mix are successful in lowering environmental emissions. For environmental sustainability and low-carbon development, it is thus advised to divert the taxation burden from renewable energy technologies to the fossil fuel industry to enhance the sustainable energy transition phenomenon for achieving Sustainable Development Goals (especially SDG-7 and SDG-13).

Keywords

Green taxes / Sustainable energy transition / Low-carbon development / Sustainable Development / G7 countries

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