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The Effect of Green Taxation and Economic Growth on Environment Hazards: The Case of Malaysia

Author

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  • Nanthakumar, Loganathan
  • Shahbaz, Muhammad
  • Taha, Roshaiza

Abstract

This paper explores how carbon taxation and economic growth affect environment hazards in Malaysia using time series data over the period of 1974-2010. We applied cointegration and causality approaches to determine long term and the direction of causal relationship between these variables. Based on the results, we found the cointegration relationship between the variables. Furthermore, we noted that Kuznets’ theory i.e. inverted-U shaped curve between economic growth and CO2 emissions is valid for Malaysia but the carbon taxation policy is ineffective to control CO2 emissions. The causality analysis revealed that there is bidirectional relationship is found between carbon tax and CO2 emissions. Economic growth Granger causes CO2 emissions and carbon tax is Granger cause of economic growth. To enhance the awareness on pollution issues governments should rely on alternative instruments, which may give benefit not only to taxpayers but also to reduce pollution, which is the pivotal issue to be tackle globally.

Suggested Citation

  • Nanthakumar, Loganathan & Shahbaz, Muhammad & Taha, Roshaiza, 2014. "The Effect of Green Taxation and Economic Growth on Environment Hazards: The Case of Malaysia," MPRA Paper 56843, University Library of Munich, Germany, revised 23 Jun 2014.
  • Handle: RePEc:pra:mprapa:56843
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    File URL: https://mpra.ub.uni-muenchen.de/56843/1/MPRA_paper_56843.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    economic growth; environment hazards;

    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General

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