The effect of the carbon tax on CO2 emissions: An application in the light of the Environmental Kuznets Curve hypothesis

Industrialization has revealed a great transformation in production systems from manual production to mass production. With the effect of this great transformation, the production and consumption of fossil fuels, which are used as the main input in production, have also increased. This excessive consumption has caused excessive carbon emissions and thus the problem of global warming. Therefore, the need to take global measures to prevent climate change has arisen. In this context, countries tried to find a solution to the problem by coming together with various conferences such as the Rio Conference (1992), the Kyoto Protocol (1997) and the Paris Climate Agreement (2015). However, a final decision could not be reached. One of the most important practices applied to prevent global warming is the carbon tax application. This tax is applied in various countries such as Finland, Poland, Sweden and Norway. The purpose of carbon tax is to solve the global warming problem by controlling carbon emissions. This study is based on the carbon tax that Norway started to implement in 1991. In the light of the Environmental Kuznets Curve hypothesis, annual data on CO2 emissions, per capita income, the square of this income and carbon tax revenues for the periods between 1991 and 2020 are examined. The stationarity degrees of the logarithmic transformations of the data were determined first with the traditional unit root tests and and then with the Becker, Enders and Lee stationarity tests of the logarithmic transformations of the data, the cointegration relationship was examined with the Fourier ADL Cointegration test approach. As a result, it was found that there was a cointegrated relationship between the variables in the model at the 5% significance level. Keywords: Unit Root, Co-integration, Fourier, Environmental Kuznets Curve