Journal Article

The role of government spending within the environmental Kuznets curve framework: evidence from G7 countries

Pirgaip, Burak, Kaya, Muhammed Veysel, Bayrakdar, Seda

2023

Overview

This study assesses the role of government spending on environmental sustainability based on a framework that combines the environmental Kuznets curve (EKC) hypothesis with the Armey curve hypothesis. Specifically, the inverted U -shaped relationships between carbon (CO 2 ) emissions and economic growth (EKC hypothesis) and between government spending and economic growth (Armey curve hypothesis) are analyzed using a composite EKC model tested for cross-sectional dependence and heterogeneity, panel unit root, panel co-integration, and the augmented mean group estimation. In so doing, this study pursues a potential transmission mechanism leading from government spending to CO 2 emissions through the growth channel and presents a novel way to develop a better understanding of how economic growth policy and energy policy can be synchronized. Empirical results show that economic growth acts as a transmitter between government spending and CO 2 emissions in the USA, UK, and Canada. However, the composite EKC hypotehesis is confirmed only for the USA and Canada, where the optimal level of government spending that maximizes CO 2 emissions is 29.87% and 29.22% of GDP, respectively. In contrast, the optimal level of government spending equivalent to 28.30% of GDP minimizes CO 2 emissions in the UK. The key policy implication is that governments can achieve sustainable economic growth by setting standards for their spending levels.

• Publisher: Springer Berlin Heidelberg,Springer Nature B.V
• Subject: Aquatic Pollution / Atmospheric Protection/Air Quality Control/Air Pollution / Canada / carbon / Carbon Dioxide / Carbon dioxide emissions / Cross-Sectional Studies / Earth and Environmental Science / Economic analysis / Economic Development / Economic growth / Economic policy / Economics / Ecotoxicology / Emissions / Empirical analysis / Energy policy / Environment / Environmental Chemistry / Environmental Health / Environmental Kuznets curve / Environmental science / environmental sustainability / GDP / Government / Government Spending / Green Energy / Green Energy, Innovation, Government Spending, Sustainable Tourism & Production under Climate Change and Pollution / Gross Domestic Product / Heterogeneity / Hypotheses / Innovation / Public Policy / Renewable Energy / Sustainable Tourism & Production under Climate Change and Pollution / Waste Water Technology / Water Management / Water Pollution Control