Fiscal instruments and fossil fuel consumption in OECD countries: Do renewable energy R&D expenditures and environmental taxes effective?

Degirmenci T., Bozatlı O., Albayrak M., Aydın M.

Journal of Environmental Management, cilt.394, 2025 (SCI-Expanded) identifier identifier

  • Yayın Türü: Makale / Tam Makale
  • Cilt numarası: 394
  • Basım Tarihi: 2025
  • Doi Numarası: 10.1016/j.jenvman.2025.127531
  • Dergi Adı: Journal of Environmental Management
  • Derginin Tarandığı İndeksler: Science Citation Index Expanded (SCI-EXPANDED), Scopus, Academic Search Premier, International Bibliography of Social Sciences, PASCAL, Aerospace Database, Agricultural & Environmental Science Database, Aqualine, Aquatic Science & Fisheries Abstracts (ASFA), BIOSIS, CAB Abstracts, Communication Abstracts, Environment Index, Geobase, Greenfile, Index Islamicus, Metadex, Pollution Abstracts, Public Affairs Index, Veterinary Science Database, Civil Engineering Abstracts
  • Anahtar Kelimeler: Environmental taxes, Fossil fuel consumption, OECD countries, R&D expenditures
  • Çukurova Üniversitesi Adresli: Evet

Özet

This study examines the effectiveness of fiscal instruments, namely renewable energy R&D expenditures and environmental taxes, in reducing fossil fuel consumption, treating the former as incentive-based and the latter as deterrent instruments. We also consider indicators of economic growth, institutional quality, trade openness, and urbanization when testing the effectiveness of these fiscal instruments. The empirical analysis covers annual data for 18 OECD member countries for the period 1994–2022. While the existence of a long-run relationship is investigated using the LM bootstrap panel cointegration method, coefficient estimates for the models are calculated using Augmented Mean Group (AMG) and Cross-Sectionally Augmented Autoregressive-Distributed Lag (CS-ARDL) methods. In the last stage, causal relationships between the variables are investigated using the Emirmahmutoglu and Kose test. When the findings from the AMG and CS-ARDL estimators are evaluated, (I) Environmental taxes and renewable energy R&D expenditures are not successful in reducing fossil fuel consumption alone. (II) The interaction of environmental taxes and renewable energy R&D expenditures is effective in reducing fossil fuel consumption in both the short and long run, since it is considered a policy set. (III) In all models, economic growth is an important determinant of fossil fuel consumption in the short and long run, and increases it. (IV) Institutional quality, trade openness, and urbanization have a statistically insignificant effect on fossil fuel consumption (even if they are effective, they are inconsistent across models). (V) The causality findings suggest that fiscal instruments and economic growth are effective in driving fossil fuel consumption. In light of these findings, the study suggests that public policies should be evaluated as a whole. Accordingly, policymakers and researchers should not neglect the importance of compositional effects when designing or evaluating public policies.