Impact of Renewable Energy and Tax Regulation on Reducing Greenhouse Gas Emissions in OECD Countries: CS-ARDL Approach

The global agenda recognizes the necessity to reduce greenhouse gas emissions
for sustainable long-term development. In this regard, the strategic priorities of
many countries in the field of energy are focused on renewable energy sources. At
the current stage of development, the technological transition to renewable and
clean energy requires the search for compromise solutions in the field of economic
policy, including an understanding of the role of tax regulation. This paper exam-
ines how the use of renewable energy sources impacts the reduction of greenhouse
gas emissions in the countries of the Organization for Economic Co-operation
and Development (OECD), considering the domestic extraction of primary re-
sources and innovative activity. Attention is also paid to the role of tax policy in
the effectiveness of reducing greenhouse gas emissions. The panel data of OECD
countries (1991–2018) was analyzed, and the non-stationarity and the cross-
correlation across countries were demonstrated, as well as the presence of time
series cointegration. The above requires the use of modern techniques in order to
build CS-ARDL models (cross-section augmented autoregressive distributed lag
modeling) to reliably estimate the short-term and long-term impact of the factors.
These results support the hypothesis of the good contribution of renewable energy
to the reduction of greenhouse gas emissions, as well as demonstrate its long-term
positive impact. At the same time, a significant contribution is found in countries
with stricter tax policies in the field of environmental protection. The obtained
results are discussed in the conclusion section, and so are some recommendations
for Russian economic policy. The present work may be useful within the scope of
establishing research consensus in the area under consideration, and also prove to
be of some methodological interest.