The role of environmental taxes on the energy use: Evidence from G7 countries

Abstract

Reducing non-renewable energy consumption is fundamental for a sustainable environment and development. Assessing the factors that drive energy consumption is vital. This study analyzes the role of environmental taxes (ETAX), per capita gross domestic product (GDP), renewable energy consumption (REC), and environmental technological innovations (ETC) on non-renewable energy consumption (EU) in G7 economies. The study employs Autoregressive AR(1) specifications to account for serial correlation and utilizes heteroskedasticity-resistant Applicable Generalized Least Squares (FGLS) and Panel Adjusted Standard Errors (PCSE) estimators as basic econometric approaches to yield long-run empirical estimates for the period 1995–2021.The study's findings indicate that environmental taxes, environmental technologies, and increased renewable energy consumption negatively affect non-renewable energy consumption and positively affect per capita GDP growth. The study's policy implications emphasize that G-7 countries should reduce their energy consumption, increase energy efficiency, and strengthen their environmental policies.