Environmental regulations, political risk and consumption-based carbon emissions: Evidence from OECD economies.

The staggering rise in global temperature and abrupt change of climate are the responses of nature alerting humanity to limit the emissions of hazardous gases and adopt environmentally-benign life style. The present study explores empirically whether any changes in environmental policy stringency (EPSI), political risk (PR), and the interaction term of EPSI*PR result in any alteration of consumption-based carbon emissions (CBCE) of the 24 advanced OECD economies over the period of 1990-2020. Prior to the empirical estimations, various diagnostic tests are employed. The empirical techniques include, panel cointegration check, Cross-sectional Augmented Autoregressive Distributed Lags (CS-ARDL), and Dumitrescu & Hurlin panel causality test. The findings confirm that imports, gross domestic product, and stringency of environment policies activate CBCE in short-run. Whereas, a unit improvement in political risk and its interaction with environmental policy stringency give rise to 0.231 MtCO2 of CBCE in long run. Interestingly, the squared term of environmental policy stringency effectively tackles such emissions. Based on the findings, we conclude that the present environment related policies of OECD member states does not effectively limit CBCE. In order to achieve genuine emissions reduction goals, the selected nations should restructure their environment related policies by prioritizing increments in environmental policy stringency along with minimizing the risks involved in the political system.

The impact of financial development and geopolitical risk on renewable energy consumption: evidence from emerging markets.

In the past three decades, the significance of large industrialized emerging economies has been highlighted. In terms of economic productivity and CO2 emissions, these markets play an important role in the global environment. Hence, to achieve global environmental needs, transition to renewable energy sources is essential. However, financial constraints along with geopolitical risks could act as possible barriers to the required transition. Thereby, in this paper, we aim to assess the impact of financial development and geopolitical risk on renewable energy consumption in emerging markets from 1996 to 2015. A two-step system GMM is tested, revealing a positive significant effect of financial development on transition to renewable energy. Moreover, contrary to the expected negative effect of geopolitical risk, our results reveal significant positive effect of geopolitical risk on renewable energy consumption. We highlight that the effects of both financial development and geopolitical risk are more pronounced in the long run. Finally, imperative policy implications are highlighted.