Measuring Environmental Policy Stringency: Approaches, Validity, and Impact on Energy Efficiency

Abstract

Proponents of the green growth strategy worldwide hold that reductions of harmful greenhouse gas emissions through environmental policy can be pursued together with increased growth and can result in higher competitiveness. Solid tests of this theory are impaired by the lack of appropriate empirical proxies for the commitment to, and stringency of, environmental policy. We contribute to the literature by: (1) computing different indicators of environmental policy stringency, both previously used in the literature and novel, (2) testing to what extent they convey similar insights through a comparison exercise, and (3) showing the implications of using one or the other methodology in an empirical application testing whether countries with more stringent environmental and energy policy have indeed shown historically higher degree of energy efficiency. The application is cast in an Energy Kuznets Curve framework. The analysis quite naturally carries over to the role of, more generally, economic policy.

Modelling Aggregate Energy Consumption for Growth in Nigeria

“…Some of the earlier studies maintain that there is divergencies rather than convergences between aggregate energy consumption and growth. The outcome of those studies points out that advance countries basically the industrialized economy maintain industrial energy intensities that are both falling and lower than developing countries (Galeotti et al, 2020;Kepplinger et al, 2013;Brunel and Levinson, 2016;Shapiro and Walker, 2018;Ministerio de, 2019). The source of the differences between convergences and divergences may arise from different technique employed, the country region, time period and focus.…”

Spotting the Environmental Effect of the Economy and Technology: How the Development Is Causing a Stringency With Carbon Emission?

“…Ismail (1996) has investigated the Malaysian economy in terms of economic evaluation of the carbon emission in the forestry sector. Galeotti et al (2017) has measured the environmental policy stringency for the impact of environmental innovation and efficiency factor of the energy too. Authors claim for the contribution in the literature through computing the diversified indicators of environmental policy stringency with the testing of environmental innovation.…”

Climate Change and Economic Growth: The Role of Environmental Policy Stringency

“…It thus becomes crucial to correctly assess the stringency of environmental policies, as only stringent policies can have beneficial effects on the economy as a whole. Several indicators have been proposed in the literature and each of them has several advantages and limitations due to the multi-dimensionality of any environmental policies (Brunel and Levinson [22], Fisher and Newell [23], and Galeotti et al [24]). In general, indicators convey different information, and country rankings often differ according to the chosen stringency measure.…”

“…For example, an increase in taxation means an increase in the SI, and the same applies to an increase in the subsidies to renewable energy or energy schemes, since they raise the opportunity cost of polluting. Other similar indices have been proposed in the literature [24,[32][33][34][35]], but we opted for the SI by OECD, in that it is one of the most recent indexes, it is available for a wide time horizon and for a large set of countries, and, more importantly, it is split between market (SI MKT ) and non-market instruments (SI NMKT ). Figures 3 and 4 show an increasing trend in the severity of the policies, especially after 2000.…”