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.