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Does Fiscal Decentralization Drive CO 2 Emissions? A Quantile Regression Analysis

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  • Wilman Gustavo Carrillo-Pulgar

    (Department of Economics, Faculty of Political and Administrative Sciences, Universidad Nacional de Chimborazo (UNACH), Riobamba 060101, Ecuador)

  • Juan Pablo Vallejo-Mata

    (Faculty of Graduate Studies, Universidad Estatal de Milagro (UNEMI), Milagro 091706, Ecuador
    Centro de Estudios para el Desarrollo del Ecuador (CEEDE), Milagro 091706, Ecuador)

  • Katherine Gissel Tixi-Gallegos

    (Faculty of Sciences, Escuela Superior Politécnica de Chimborazo (ESPOCH), Riobamba 060101, Ecuador)

  • Patricio Alejandro Sánchez Cuesta

    (Department of Economics, Faculty of Political and Administrative Sciences, Universidad Nacional de Chimborazo (UNACH), Riobamba 060101, Ecuador)

  • Josué Romero-Alvarado

    (Faculty of Graduate Studies, Universidad Estatal de Milagro (UNEMI), Milagro 091706, Ecuador
    Centro de Estudios para el Desarrollo del Ecuador (CEEDE), Milagro 091706, Ecuador)

Abstract

Achieving sustainable models is a crucial challenge today, where government actions play a fundamental role. Therefore, this study aims to analyze the impact of fiscal decentralization on CO 2 emissions in 40 economies between 2000 and 2020. To this end, an unbalanced panel was constructed, and the Method of Moments Quantile Regression (MMQR) was employed. As a robustness check, Driscoll and Kraay’s standard errors approach was used. The MMQR results indicate that fiscal decentralization has a positive and significant effect across all quantiles of CO 2 emissions. Additionally, it was found that revenue-side decentralization has a greater impact on the lower quantiles of CO 2 emissions, while expenditure-side decentralization has a stronger effect on the upper quantiles. The findings also reveal that renewable energy mitigates CO 2 emissions, whereas economic growth, resource rents, and information and communication technologies increase them, although the latter with lower statistical significance. These findings are expected to serve as a basis for public policy formulation aimed at improving environmental quality.

Suggested Citation

  • Wilman Gustavo Carrillo-Pulgar & Juan Pablo Vallejo-Mata & Katherine Gissel Tixi-Gallegos & Patricio Alejandro Sánchez Cuesta & Josué Romero-Alvarado, 2025. "Does Fiscal Decentralization Drive CO 2 Emissions? A Quantile Regression Analysis," JRFM, MDPI, vol. 18(5), pages 1-22, April.
    • Handle: RePEc:gam:jjrfmx:v:18:y:2025:i:5:p:235-:d:1643966
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    References listed on IDEAS

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    1. Khan, Zeeshan & Ali, Shahid & Dong, Kangyin & Li, Rita Yi Man, 2021. "How does fiscal decentralization affect CO2 emissions? The roles of institutions and human capital," Energy Economics, Elsevier, vol. 94(C).
    2. Hashem Pesaran, M. & Yamagata, Takashi, 2008. "Testing slope homogeneity in large panels," Journal of Econometrics, Elsevier, vol. 142(1), pages 50-93, January.
    3. Lin, Boqiang & Wang, Zhijun, 2024. "Do local government investment preferences influence renewable energy technology innovation? Evidence from China," Renewable Energy, Elsevier, vol. 231(C).
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