Environmental quality and sustainability: exploring the role of environmental taxes, environment-related technologies, and R&D expenditure

Abstract

The surge in economic and human development has led to increasing concerns about environmental degradation, thus necessitating effective strategies to enhance sustainability and environmental quality. Therefore, this study empirically examines the impact of environmental fiscal policies, environmental technologies, and research and development (R&D) expenditures on achieving environmental sustainability in the G7 countries. Using advanced econometric techniques, including the Cross-Sectionally Augmented Autoregressive Distributed Lags (CS-ARDL) model and the Dynamic Common Correlated Effects (DCCE) approach, the study identifies both short-run and long-run correlations between the aforementioned variables and their impact on greenhouse gas (GHG) emissions. Our findings confirm the inverted U-shaped Kuznets Curve relationship and reinforce the previous literature on the complex dynamics between economic growth and GHG emissions specific to developed countries. The research also supports the effectiveness of well-designed environmental taxes in reducing environmental degradation and GHG emissions, consistent with and extending existing studies in this area. In addition, the study provides empirical evidence of the critical role of environmental technologies and targeted R&D expenditures in improving environmental quality. In terms of policy implications, our research underscores the urgency for policymakers in the G7 countries to fine-tune environmental taxation mechanisms and increase investment in sustainable technological solutions. Specific recommendations include the development of more efficient tax systems that adhere to the polluter-pays principle, as well as financial incentives such as tax credits and subsidies aimed at accelerating green technology adoption and innovation. In doing so, the study seeks to contribute to the broader discourse on environmental policy and sustainable development, providing valuable perspectives for both the academic community and policy actors.