The role of government spending within the environmental Kuznets curve framework: evidence from G7 countries


PİRGAİP B., Bayrakdar S., Kaya M. V.

Environmental Science and Pollution Research, 2023 (SCI-Expanded) identifier identifier

  • Publication Type: Article / Article
  • Publication Date: 2023
  • Doi Number: 10.1007/s11356-023-25180-9
  • Journal Name: Environmental Science and Pollution Research
  • Journal Indexes: Science Citation Index Expanded (SCI-EXPANDED), Scopus, IBZ Online, ABI/INFORM, Aerospace Database, Aqualine, Aquatic Science & Fisheries Abstracts (ASFA), BIOSIS, CAB Abstracts, EMBASE, Environment Index, Geobase, MEDLINE, Pollution Abstracts, Veterinary Science Database, Civil Engineering Abstracts
  • Keywords: Armey curve, Carbon emissions, Economic growth, Environmental Kuznets curve, G7 countries, Government spending, Renewable energy consumption
  • Hacettepe University Affiliated: Yes

Abstract

© 2023, The Author(s), under exclusive licence to Springer-Verlag GmbH Germany, part of Springer Nature.This study assesses the role of government spending on environmental sustainability based on a framework that combines the environmental Kuznets curve (EKC) hypothesis with the Armey curve hypothesis. Specifically, the inverted U-shaped relationships between carbon (CO2) emissions and economic growth (EKC hypothesis) and between government spending and economic growth (Armey curve hypothesis) are analyzed using a composite EKC model tested for cross-sectional dependence and heterogeneity, panel unit root, panel co-integration, and the augmented mean group estimation. In so doing, this study pursues a potential transmission mechanism leading from government spending to CO2 emissions through the growth channel and presents a novel way to develop a better understanding of how economic growth policy and energy policy can be synchronized. Empirical results show that economic growth acts as a transmitter between government spending and CO2 emissions in the USA, UK, and Canada. However, the composite EKC hypotehesis is confirmed only for the USA and Canada, where the optimal level of government spending that maximizes CO2 emissions is 29.87% and 29.22% of GDP, respectively. In contrast, the optimal level of government spending equivalent to 28.30% of GDP minimizes CO2 emissions in the UK. The key policy implication is that governments can achieve sustainable economic growth by setting standards for their spending levels.