Dynamic relationship between green finance, environmental taxes, and CO2 emissions in transition toward circular economy: what causes what?

• Published in: Environmental science and pollution research international 2023-09, Vol.30 (45), p.101511-101521
• Main Authors: Jiang, Chun, Qiu, Yihan
• Format: Article
• Language: English
• Subjects: Aquatic Pollution; Atmospheric Protection/Air Quality Control/Air Pollution; Brazil; Carbon dioxide; Carbon dioxide emissions; China; Circular economy; Earth and Environmental Science; Ecotoxicology; Emissions; Environment; Environmental Chemistry; Environmental Health; Environmental quality; environmental sustainability; Environmental tax; family; Finance; Financing; India; Method of moments; Pollution; regression analysis; Research Article; South Africa; Taxation; Taxes; Waste Water Technology; Water Management; Water Pollution Control
• ISSN: 1614-7499; 0944-1344; 1614-7499
• DOI: 10.1007/s11356-023-28912-z

The study was aimed at investigating the dynamic relationship between environmental taxes, green financing, and carbon dioxide (CO 2 ) emissions in Brazil, China, India, and South Africa from 1994 to 2019. To thoroughly examine the proposed relationship, a family of robust econometric methods is used to get reliable and accurate results. Our evidence indicates that green finance and CO 2 emissions are negatively connected with each other. Similarly, positive relationship is found between environmental taxes and CO 2 emissions. Additionally, environmental taxes and green finance are positively related as well. Further, the results of the Method of Moments Quantile Regression estimator indicate that green finance and CO 2 emissions decrease in countries with higher pollution compared to those with lower pollution. Interestingly, environmental taxes only contribute to pollution in countries with higher emissions, whereas CO 2 emissions increase environmental taxes in all sample countries. Lastly, green finance has a mitigating effect only in countries with greater pollution, and CO 2 emissions have a negative rebound effect on green finance in countries with greater CO 2 emissions. According to the evidence, green financing can be an effective tool for promoting environmental quality. By allocating the funds collected from environmental taxes to green financing, environmental sustainability can be promoted in sample countries.