Environmental policy stringency, renewable energy consumption and CO₂ emissions: Panel cointegration analysis for BRIICTS countries

ABSTRACT

The aim of this paper is to investigate the relationship between environmental policy stringency and CO₂ emissions in BRIICTS (Brazil, Russia, India, Indonesia, China, Turkey and South Africa) for the period 1993–2014 after controlling for renewable energy, fossil energy, oil prices and income. We believe that this is the first attempt to use the recently OECD-developed environmental policy stringency index to test the effectiveness of environmental stringency policy in reducing CO₂ emission in these countries. Applying the Panel Pooled Mean Group Autoregressive Distributive Lag (PMG-ARDL) estimator, we found an inverted U–shaped relationship between environmental policy stringency and CO₂ emissions. This suggests that initially strict stringent environmental policy does not lead to improvements in the environment but after a certain level or a threshold point, environmental stringency policy leads to improvement in environmental quality. Renewable energy consumption was negatively related to CO₂ emissions while fossil energy consumption and real oil prices and income were positively and significantly related to CO₂. Our findings suggest that strengthening the stringency of environmental policies and promoting renewable energy are effective ways of preventing environmental degradation in BRIICTS countries.

KEYWORDS:

• BRIICTS
• co₂ emissions
• environmental policy stringency
• oil prices
• panel Pooled Mean Group
• renewable energy consumption

Acknowledgments

We are very grateful for the critical comments made by the two anonymous referees that significantly improved the depth of the analysis of the paper. We also thank the Editor of the Journal for his encouragement. The usual disclaimer applies and the views are the sole responsibility of the author.

Declaration of interest statement

The authors have not received any funding that could have appeared to influence the work reported in this paper.

Notes

¹ Data on environmental tax is not available for all BRIICTS countries for the period under study.

² For the structure of the EPS indicator including more technical details on the policy instruments and aggregation, see OECD (2015).

³ More on the effects of pollution on health, see (Landrigan et al. 2018)and (World Bank 2016).

⁴ This include Renewable Energy Certificates (RECs), also known as green energy certificates or tradable renewable certificates that show proof that energy has been generated from renewable sources such as solar or wind power.

⁵ As of 16 March, 2020, fossil energy consumption was available only up to 2014 by the World Bank. https://data.worldbank.org/indicator/EG.USE.COMM.FO.ZS.

⁶ The number of the series involved and the small sample of countries do not allow us to robustly conduct the second generation of panel cointegration such as that of Westerlund (2007).

⁷ We are grateful to one of the Referees for pointing this to us.