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Fiscal decentralization, environmental policy stringency, and resource sustainability: Panacea or Pandora's box in high resource consuming countries

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  • Zhang, Cuifang
  • Xiang, Xiandeng

Abstract

Improving fiscal management and resource efficiency has become one of the imperative policy agendas, particularly for resource-rich economies. Due to ecological susceptibility and resource scarcity, exploring the core factors of resource consumption is critical for designing an effective climate policy. Manifestly, fiscal decentralization has an enormous potential to pursue sustainable development. Therefore, this study investigates the impact of fiscal decentralization and ecological policy stringency on consumption-based resource footprint (RF) in resource-intensive countries from 1990 to 2019. It applies a cross-section augmented distributive lag estimator in resolving the issues of cross-section dependency and slope heterogeneity. The study's long and short-run outcomes reveal that revenue decentralization and environmental governance significantly reduce RF. However, the contradictory results are examined by expenditure decentralization, which promotes RF. Moreover, strict environmental regulations moderate the positive influence of expenditure decentralization, implying that the resource-decoupling effect of expenditure decentralization on RF is reduced when the countries are embodied with effective environmental governance systems. Similarly, the alternative methods endorsed identical findings, and this study offers valuable policy suggestions to strengthen the environmental protection system and formulate sound ecological policies for efficient resource utilization under the decentralization framework.

Suggested Citation

  • Zhang, Cuifang & Xiang, Xiandeng, 2023. "Fiscal decentralization, environmental policy stringency, and resource sustainability: Panacea or Pandora's box in high resource consuming countries," Resources Policy, Elsevier, vol. 83(C).
    • Handle: RePEc:eee:jrpoli:v:83:y:2023:i:c:s0301420723002556
    DOI: 10.1016/j.resourpol.2023.103544
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