The impact of environmental regulations on carbon emissions in countries with different levels of emissions

Abstract

The study analyzes the impact of environmental regulations on carbon emissions in countries with different levels of emissions, utilizing two measures of carbon emissions based on: production (PBA) and consumption (CBA) accounting. Environmental regulations are measured by means of three components of the Environmental Policy Stringency (EPS) index: market-based and non-market-based instruments, and technology support. The Moments-Quantile Regression method is employed to assess the effectiveness of these policies across countries with varying levels of emissions—high, medium, and low within the Environmental Kuznets Curve. The findings indicate that increased stringency in environmental regulations correlates with reduced carbon emissions per capita. Notably, the EPS index has a more significant effect on reducing PBA emissions compared to CBA emissions. A key finding is that the EPS index is more effective in countries with lower pollution per capita (i.e., lower quantiles) than in those with higher pollution per capita. Among the three components, market-based instruments are identified as the most effective in reducing carbon emissions. Additionally, in countries where per capita emissions are relatively low, the combination of market and non-market instruments proves to be the most effective in reducing emissions. In contrast, the highest carbon emitters per capita tend to achieve emissions reductions primarily through technological support.