The role of financial and trade globalization in enhancing environmental sustainability: Evaluating the effectiveness of carbon taxation and renewable energy in EU member countries

Abstract

The study addresses the pressing issue of environmental degradation, pinpointing carbon dioxide (CO₂) emissions as its primary driver, posing a threat to global environmental sustainability, including the member countries of the European Union (EU). Global warming problems persist, but previous studies have not adequately explored the factors that contribute to a reduction in carbon emissions in EU countries. The paper fills the gap by assessing the efficacy of carbon tax and eco-innovation in mitigating CO₂ levels from 1994 to 2019, considering the influence of renewable energy and various aspects of globalization. The study establishes long-term associations among the indicators examined using advanced methodologies, including the cross-sectional autoregressive distributed lag approach and the Westerlund cointegration method. Notably, the results highlight that carbon taxes, eco-innovation, renewable energy, and globalization contribute to slowing environmental deterioration, and economic progress plays a role in mitigating environmental sustainability challenges in EU member states. These findings reinforce the importance of robust strategies for reducing CO₂ emissions and minimizing adverse environmental impacts.