IDEAS home Printed from https://ideas.repec.org/a/spr/envpol/v24y2022i2d10.1007_s10018-021-00317-7.html
   My bibliography  Save this article

Does green policy pay dividends?

Author

Listed:
  • Nusrate Aziz

    (Algoma University)

  • Belayet Hossain

    (Thompson Rivers University)

  • Laura Lamb

    (Thompson Rivers University)

Abstract

While there is a near global consensus about the need to address climate change, most countries are hesitant to employ sufficiently stringent policies in fear of sacrificing economic growth. The objective of this research is to examine the impact of environmental policy on economic growth, using the OECD’s Environmental Policy Stringency (EPS) index across 21 OECD countries from 1990 to 2014. An augmented Solow Model with the inclusion of variables to represent human capital, trade openness and the EPS index is used to assess whether policy stringency affects growth with empirical analysis comprised of a pooled mean group estimator, dynamic OLS, fixed effects and pooled OLS to estimate the short and long run effects. The results reveal that policy stringency negatively affects economic growth in the short run but pays dividends of positive growth in the long run. There appears to be a threshold level of the EPS, beyond which the dividend is realized in the long run. The results are expected to be of interest to policy makers who strive to address climate change without trading off economic growth.

Suggested Citation

  • Nusrate Aziz & Belayet Hossain & Laura Lamb, 2022. "Does green policy pay dividends?," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 24(2), pages 147-172, April.
    • Handle: RePEc:spr:envpol:v:24:y:2022:i:2:d:10.1007_s10018-021-00317-7
    DOI: 10.1007/s10018-021-00317-7
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s10018-021-00317-7
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s10018-021-00317-7?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Francesco Ricci, 2007. "Channels of transmission of environmental policy to economic growth," Post-Print hal-03062228, HAL.
    2. Paul Lanoie & Michel Patry & Richard Lajeunesse, 2008. "Environmental regulation and productivity: testing the porter hypothesis," Journal of Productivity Analysis, Springer, vol. 30(2), pages 121-128, October.
    3. Misato Sato & Gregor Singer & Damien Dussaux & Stefania Lovo, 2015. "International and sectoral variation in energy prices 1995-2011: how does it relate to emissions policy stringency?," GRI Working Papers 187, Grantham Research Institute on Climate Change and the Environment.
    4. Robert C. Feenstra & Robert Inklaar & Marcel P. Timmer, 2015. "The Next Generation of the Penn World Table," American Economic Review, American Economic Association, vol. 105(10), pages 3150-3182, October.
    5. Stefan Ambec & Mark A. Cohen & Stewart Elgie & Paul Lanoie, 2013. "The Porter Hypothesis at 20: Can Environmental Regulation Enhance Innovation and Competitiveness?," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 7(1), pages 2-22, January.
    6. Rubashkina, Yana & Galeotti, Marzio & Verdolini, Elena, 2015. "Environmental regulation and competitiveness: Empirical evidence on the Porter Hypothesis from European manufacturing sectors," Energy Policy, Elsevier, vol. 83(C), pages 288-300.
    7. Robert M. Solow, 1956. "A Contribution to the Theory of Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 70(1), pages 65-94.
    8. Eli Berman & Linda T. M. Bui, 2001. "Environmental Regulation And Productivity: Evidence From Oil Refineries," The Review of Economics and Statistics, MIT Press, vol. 83(3), pages 498-510, August.
    9. Beck, Marisa & Rivers, Nicholas & Wigle, Randall & Yonezawa, Hidemichi, 2015. "Carbon tax and revenue recycling: Impacts on households in British Columbia," Resource and Energy Economics, Elsevier, vol. 41(C), pages 40-69.
    10. George van Leeuwen & Pierre Mohnen, 2017. "Revisiting the Porter hypothesis: an empirical analysis of Green innovation for the Netherlands," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 26(1-2), pages 63-77, February.
    11. Ricci, Francesco, 2007. "Channels of transmission of environmental policy to economic growth: A survey of the theory," Ecological Economics, Elsevier, vol. 60(4), pages 688-699, February.
    12. Lu, Chuanyi & Tong, Qing & Liu, Xuemei, 2010. "The impacts of carbon tax and complementary policies on Chinese economy," Energy Policy, Elsevier, vol. 38(11), pages 7278-7285, November.
    13. Paul Lanoie & Jérémy Laurent‐Lucchetti & Nick Johnstone & Stefan Ambec, 2011. "Environmental Policy, Innovation and Performance: New Insights on the Porter Hypothesis," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 20(3), pages 803-842, September.
    14. Lin, Boqiang & Jia, Zhijie, 2018. "The energy, environmental and economic impacts of carbon tax rate and taxation industry: A CGE based study in China," Energy, Elsevier, vol. 159(C), pages 558-568.
    15. Stock, James H & Watson, Mark W, 1993. "A Simple Estimator of Cointegrating Vectors in Higher Order Integrated Systems," Econometrica, Econometric Society, vol. 61(4), pages 783-820, July.
    16. Adam B. Jaffe & Karen Palmer, 1997. "Environmental Regulation And Innovation: A Panel Data Study," The Review of Economics and Statistics, MIT Press, vol. 79(4), pages 610-619, November.
    17. J. Bergh & D. Veen-Groot, 2001. "Constructing aggregate environmental-economic indicators: a comparison of 12 OECD countries," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 4(1), pages 1-16, March.
    18. Brännlund Runar & Karimu Amin & Söderholm Patrik, 2017. "Convergence in carbon dioxide emissions and the role of growth and institutions: a parametric and non-parametric analysis," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 19(2), pages 359-390, April.
    19. Im, Kyung So & Pesaran, M. Hashem & Shin, Yongcheol, 2003. "Testing for unit roots in heterogeneous panels," Journal of Econometrics, Elsevier, vol. 115(1), pages 53-74, July.
    20. Amine Ben Amar, 2021. "Economic growth and environment in the United Kingdom: robust evidence using more than 250 years data," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 23(4), pages 667-681, October.
    21. Nong, Duy, 2018. "General equilibrium economy-wide impacts of the increased energy taxes in Vietnam," Energy Policy, Elsevier, vol. 123(C), pages 471-481.
    22. Enrico Botta & Tomasz Koźluk, 2014. "Measuring Environmental Policy Stringency in OECD Countries: A Composite Index Approach," OECD Economics Department Working Papers 1177, OECD Publishing.
    23. Karen Palmer & Wallace E. Oates & Paul R. Portney & Karen Palmer & Wallace E. Oates & Paul R. Portney, 2004. "Tightening Environmental Standards: The Benefit-Cost or the No-Cost Paradigm?," Chapters, in: Environmental Policy and Fiscal Federalism, chapter 3, pages 53-66, Edward Elgar Publishing.
    24. Susana Silva & Isabel Soares & Carlos Pinho, 2012. "The Impact of Renewable Energy Sources on Economic Growth and CO2 Emissions - a SVAR approach," European Research Studies Journal, European Research Studies Journal, vol. 0(4), pages 133-144.
    25. William Nordhaus, 2018. "Projections and Uncertainties about Climate Change in an Era of Minimal Climate Policies," American Economic Journal: Economic Policy, American Economic Association, vol. 10(3), pages 333-360, August.
    26. Edward F. Blackburne III & Mark W. Frank, 2007. "Estimation of nonstationary heterogeneous panels," Stata Journal, StataCorp LP, vol. 7(2), pages 197-208, June.
    27. Hansen, Bruce E., 1999. "Threshold effects in non-dynamic panels: Estimation, testing, and inference," Journal of Econometrics, Elsevier, vol. 93(2), pages 345-368, December.
    28. Gray, Wayne B, 1987. "The Cost of Regulation: OSHA, EPA and the Productivity Slowdown," American Economic Review, American Economic Association, vol. 77(5), pages 998-1006, December.
    29. Gollop, Frank M & Roberts, Mark J, 1983. "Environmental Regulations and Productivity Growth: The Case of Fossil-Fueled Electric Power Generation," Journal of Political Economy, University of Chicago Press, vol. 91(4), pages 654-674, August.
    30. Martínez-Zarzoso, Inmaculada & Bengochea-Morancho, Aurelia & Morales-Lage, Rafael, 2019. "Does environmental policy stringency foster innovation and productivity in OECD countries?," Energy Policy, Elsevier, vol. 134(C).
    31. Charles Dufour & Paul Lanoie & Michel Patry, 1998. "Regulation and Productivity," Journal of Productivity Analysis, Springer, vol. 9(3), pages 233-247, March.
    32. N. Gregory Mankiw & David Romer & David N. Weil, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(2), pages 407-437.
    33. Pesaran, M. Hashem & Smith, Ron, 1995. "Estimating long-run relationships from dynamic heterogeneous panels," Journal of Econometrics, Elsevier, vol. 68(1), pages 79-113, July.
    34. de Vries, F.P. & Withagen, C.A.A.M., 2005. "Innovation and environmental stringency : The case of sulfur dioxide abatement," Other publications TiSEM 9f3f79ab-2646-4f72-845c-4, Tilburg University, School of Economics and Management.
    35. Yamazaki, Akio, 2017. "Jobs and climate policy: Evidence from British Columbia's revenue-neutral carbon tax," Journal of Environmental Economics and Management, Elsevier, vol. 83(C), pages 197-216.
    36. Mark A. Cohen & Adeline Tubb, 2018. "The Impact of Environmental Regulation on Firm and Country Competitiveness: A Meta-analysis of the Porter Hypothesis," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 5(2), pages 371-399.
    37. Freire-González, Jaume & Puig-Ventosa, Ignasi, 2019. "Reformulating taxes for an energy transition," Energy Economics, Elsevier, vol. 78(C), pages 312-323.
    38. J.B. Smith & W A. Sims, 1985. "The Impact of Pollution Charges on Productivity Growth in Canadian Brewing," RAND Journal of Economics, The RAND Corporation, vol. 16(3), pages 410-423, Autumn.
    39. George Halkos & Iacovos Psarianos, 2016. "Exploring the effect of including the environment in the neoclassical growth model," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 18(3), pages 339-358, July.
    40. Allan, Grant & Lecca, Patrizio & McGregor, Peter & Swales, Kim, 2014. "The economic and environmental impact of a carbon tax for Scotland: A computable general equilibrium analysis," Ecological Economics, Elsevier, vol. 100(C), pages 40-50.
    41. Gray, Wayne B. & Shadbegian, Ronald J., 2003. "Plant vintage, technology, and environmental regulation," Journal of Environmental Economics and Management, Elsevier, vol. 46(3), pages 384-402, November.
    42. John P. Weyant, 1993. "Costs of Reducing Global Carbon Emissions," Journal of Economic Perspectives, American Economic Association, vol. 7(4), pages 27-46, Fall.
    43. Stewart Elgie & Jessica McClay, 2013. "Policy Commentary/Commentaire BC's Carbon Tax Shift Is Working Well after Four Years (Attention Ottawa)," Canadian Public Policy, University of Toronto Press, vol. 39(s2), pages 1-10, August.
    44. World Bank, 2017. "World Development Indicators 2017," World Bank Publications - Books, The World Bank Group, number 26447, December.
    45. Bosquet, Benoit, 2000. "Environmental tax reform: does it work? A survey of the empirical evidence," Ecological Economics, Elsevier, vol. 34(1), pages 19-32, July.
    46. Bildirici, Melike E. & Gökmenoğlu, Seyit M., 2017. "Environmental pollution, hydropower energy consumption and economic growth: Evidence from G7 countries," Renewable and Sustainable Energy Reviews, Elsevier, vol. 75(C), pages 68-85.
    47. repec:ers:journl:v:xv:y:2012:i:sie:p:133-144 is not listed on IDEAS
    48. Jehan Sauvage, 2014. "The Stringency of Environmental Regulations and Trade in Environmental Goods," OECD Trade and Environment Working Papers 2014/3, OECD Publishing.
    49. Ebru Alpay & Joe Kerkvliet & Steven Buccola, 2002. "Productivity Growth and Environmental Regulation in Mexican and U.S. Food Manufacturing," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 84(4), pages 887-901.
    50. Bhattacharya, Mita & Paramati, Sudharshan Reddy & Ozturk, Ilhan & Bhattacharya, Sankar, 2016. "The effect of renewable energy consumption on economic growth: Evidence from top 38 countries," Applied Energy, Elsevier, vol. 162(C), pages 733-741.
    51. Soytas, Ugur & Sari, Ramazan, 2009. "Energy consumption, economic growth, and carbon emissions: Challenges faced by an EU candidate member," Ecological Economics, Elsevier, vol. 68(6), pages 1667-1675, April.
    52. Philipp Dees & Georgeta Vidican Auktor, 2018. "Renewable energy and economic growth in the MENA region: empirical evidence and policy implications," Middle East Development Journal, Taylor & Francis Journals, vol. 10(2), pages 225-247, July.
    53. Xingping Zhang & Zhengquan Guo & Yuhua Zheng & Jinchen Zhu & Jing Yang, 2016. "A CGE Analysis of the Impacts of a Carbon Tax on Provincial Economy in China," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 52(6), pages 1372-1384, June.
    54. Claire Brunel & Arik Levinson, 2016. "Measuring the Stringency of Environmental Regulations," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 10(1), pages 47-67.
    55. Barbera, Anthony J. & McConnell, Virginia D., 1990. "The impact of environmental regulations on industry productivity: Direct and indirect effects," Journal of Environmental Economics and Management, Elsevier, vol. 18(1), pages 50-65, January.
    56. Vahid Mohamad Taghvaee & Jalil Khodaparast Shirazi & Mohamed Amine Boutabba & Alireza Seifi Aloo, 2017. "Economic Growth and Renewable Energy in Iran," Iranian Economic Review (IER), Faculty of Economics,University of Tehran.Tehran,Iran, vol. 21(4), pages 789-808, Autumn.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Francisco Serranito & Donatella Gatti & Gaye-Del Lo, 2023. "Unpacking the green box: Determinants of Environmental Policy Stringency in European countries," Working Papers hal-04202808, HAL.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Albrizio, Silvia & Kozluk, Tomasz & Zipperer, Vera, 2017. "Environmental policies and productivity growth: Evidence across industries and firms," Journal of Environmental Economics and Management, Elsevier, vol. 81(C), pages 209-226.
    2. Erik Hille & Patrick Möbius, 2019. "Environmental Policy, Innovation, and Productivity Growth: Controlling the Effects of Regulation and Endogeneity," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 73(4), pages 1315-1355, August.
    3. Anabel Zárate-Marco & Jaime Vallés-Giménez, 2015. "Environmental tax and productivity in a decentralized context: new findings on the Porter hypothesis," European Journal of Law and Economics, Springer, vol. 40(2), pages 313-339, October.
    4. Stefan Ambec & Mark A. Cohen & Stewart Elgie & Paul Lanoie, 2013. "The Porter Hypothesis at 20: Can Environmental Regulation Enhance Innovation and Competitiveness?," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 7(1), pages 2-22, January.
    5. Johan Brolund & Robert Lundmark, 2017. "Effect of Environmental Regulation Stringency on the Pulp and Paper Industry," Sustainability, MDPI, vol. 9(12), pages 1-16, December.
    6. Rubashkina, Yana & Galeotti, Marzio & Verdolini, Elena, 2015. "Environmental regulation and competitiveness: Empirical evidence on the Porter Hypothesis from European manufacturing sectors," Energy Policy, Elsevier, vol. 83(C), pages 288-300.
    7. Earnhart, Dietrich & Germeshausen, Robert & von Graevenitz, Kathrine, 2022. "Effects of information-based regulation on financial outcomes: Evidence from the European Union's public emission registry," ZEW Discussion Papers 22-015, ZEW - Leibniz Centre for European Economic Research.
    8. Dietrich Earnhart & Dylan G. Rassier, 2016. "“Effective regulatory stringency” and firms’ profitability: the effects of effluent limits and government monitoring," Journal of Regulatory Economics, Springer, vol. 50(2), pages 111-145, October.
    9. Martínez-Zarzoso, Inmaculada & Bengochea-Morancho, Aurelia & Morales-Lage, Rafael, 2019. "Does environmental policy stringency foster innovation and productivity in OECD countries?," Energy Policy, Elsevier, vol. 134(C).
    10. Rassier, Dylan G. & Earnhart, Dietrich, 2015. "Effects of environmental regulation on actual and expected profitability," Ecological Economics, Elsevier, vol. 112(C), pages 129-140.
    11. Wang, Yan & Shen, Neng, 2016. "Environmental regulation and environmental productivity: The case of China," Renewable and Sustainable Energy Reviews, Elsevier, vol. 62(C), pages 758-766.
    12. Stefan Ambec & Paul Lanoie, 2007. "When and Why Does It Pay To Be Green?," CIRANO Working Papers 2007s-20, CIRANO.
    13. Ambec, Stefan & Barla, Philippe, 2005. "Can Environmental Regulations be Good for Business? an Assessment of the Porter Hypothesis," Cahiers de recherche 0505, Université Laval - Département d'économique.
    14. Xie, Rong-hui & Yuan, Yi-jun & Huang, Jing-jing, 2017. "Different Types of Environmental Regulations and Heterogeneous Influence on “Green” Productivity: Evidence from China," Ecological Economics, Elsevier, vol. 132(C), pages 104-112.
    15. Lena, Daniela & Pasurka, Carl A. & Cucculelli, Marco, 2022. "Environmental regulation and green productivity growth: Evidence from Italian manufacturing industries," Technological Forecasting and Social Change, Elsevier, vol. 184(C).
    16. Mian Yang & Yining Yuan & Fuxia Yang & Dalia Patino-Echeverri, 2021. "Effects of environmental regulation on firm entry and exit and China’s industrial productivity: a new perspective on the Porter Hypothesis," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 23(4), pages 915-944, October.
    17. Xiang Deng & Li Li, 2020. "Promoting or Inhibiting? The Impact of Environmental Regulation on Corporate Financial Performance—An Empirical Analysis Based on China," IJERPH, MDPI, vol. 17(11), pages 1-17, May.
    18. He, Yiqing & Ding, Xin & Yang, Chuchu, 2021. "Do environmental regulations and financial constraints stimulate corporate technological innovation? Evidence from China," Journal of Asian Economics, Elsevier, vol. 72(C).
    19. Philip Kerner & Torben Klarl & Tobias Wendler, 2021. "Green Technologies, Environmental Policy and Regional Growth," Bremen Papers on Economics & Innovation 2104, University of Bremen, Faculty of Business Studies and Economics.
    20. Zhuanlan Sun & Demi Zhu, 2023. "Investigating environmental regulation effects on technological innovation: A meta-regression analysis," Energy & Environment, , vol. 34(3), pages 463-492, May.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:envpol:v:24:y:2022:i:2:d:10.1007_s10018-021-00317-7. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.