Environmental Effects of Fiscal Policy, Oil Production and Renewable Energy in the Presence of the Environmental Kuznets Curve

This thesis primarily aims at analyzing the environmental effects of fiscal policy, oil production and renewable energy consumption in the presence of the environmental Kuznets curve. To this end, this thesis is divided into three different sections. Firstly, the relationship between fiscal policy and CO2 emissions from different fuel sources is investigated. To ensure robust results, second generation time series econometric procedures which account for multiple structural breaks in the series are employed. The EKC hypothesis is valid in all the four models employed. Results from all four models show that fiscal policy has a positive and insignificant relationship, a negative and significant relationship, a positive and significant relationship and a negative and significant relationship with CO2 emissions from solid, liquid, gaseous and total sources respectively. Granger causality test with the Toda Yamamoto and Dolado Lutkepohl procedure validates the growth hypothesis for Thailand. Secondly, the environmental effect of oil production in 15 oil producing countries is investigated while controlling for the environmental Kuznets curve hypothesis. First and second generation panel econometric techniques validate the presence of cointegration in the adopted model. Estimation results imply a positive relationship between oil production and CO2 emissions which is robust across all mean based panel estimators. The environmental Kuznets curve hypothesis (EKC) is validated in two of the three specified mean based estimators. Quantile regression results show that the EKC hypothesis is significantly valid only at higher emission countries while oil production has a significant positive relationship with CO2 emissions only at lower emission countries. Lastly, the relationship between renewable energy consumption, energy prices and CO2 emissions is investigated for the group of seven (G7) economies. Panel and country specific cointegration tests validate the presence of cointegration for all countries and at the panel level. Estimation results show that renewable energy and energy prices both have negative relationships with CO2 emissions at the panel level. At country specific levels, energy price abates CO2 emissions in all the G7 countries. Only in the UK and Italy is there a significant and robust CO2 abatement effect of renewable energy consumption.