Global Journal of Economic and Finance Research

This study analyzes the simultaneous impact of environmental taxation, economic growth, and financial development on renewable energy consumption in OECD countries in the period 2003–2021. The data is built from sources from the OECD, World Bank and KOF, with a tabular data model that controls for country and time effects to better reflect differences between countries as well as fluctuations over time. The empirical results show that environmental taxation and financial development have a positive impact, while economic growth does not show clear statistical significance in the linear model. In addition, carbon emissions are inversely correlated with renewable energy consumption. Durability tests show relatively stable results across different model specifications. The study suggests that environmental tax policies and development finance systems could play an important role in accelerating the transition to renewable energy in OECD economies.

environmental taxes, renewable energy consumption, financial development, economic growth, OECD, Panel Data

1. Al Shammre, A. S., Benhamed, A., Ben-Salha, O., & Jaidi, Z. (2023). Do environmental taxes affect carbon dioxide emissions in OECD countries? Evidence from the dynamic panel threshold model. Systems, 11(6), 307. https://doi.org/10.3390/systems11060307
2. Ambec, S., & Barla, P. (2002). A theoretical foundation of the Porter hypothesis. Economics Letters, 75(3), 355–360. https://doi.org/10.1016/S0165-1765(02)00005-8
3. Arogundade, S., & Hassan, A. S. (2024). The path to green economy: Do environmental taxes and renewable energy transition matter in OECD countries? World Development Sustainability, 5, 100189. https://doi.org/10.1016/j.wds.2024.100189
4. Aydın, M., & Bozatlı, O. (2023). The effects of green innovation, environmental taxes, and financial development on renewable energy consumption in OECD countries. Energy, 280, 128105. https://doi.org/10.1016/j.energy.2023.128105
5. Bashir, M. F., Ma, B., Shahbaz, M., Shahzad, U., & Vo, X. V. (2021). Unveiling the heterogeneous impacts of environmental taxes on energy consumption and energy intensity: Empirical evidence from OECD countries. Energy, 226, 120366. https://doi.org/10.1016/j.energy.2021.120366
6. Bashir, M. F., Ma, B., Bashir, M. A., Radulescu, M., & Shahzad, U. (2022). Investigating the role of environmental taxes and regulations for renewable energy consumption: Evidence from developed economies. Economic Research-Ekonomska Istraživanja, 35(1), 1262–1284. https://doi.org/10.1080/1331677X.2021.1962383
7. Camacho Ballesta, J. A., da Silva Almeida, L., & Rodríguez, M. (2022). An analysis of the main driving factors of renewable energy consumption in the European Union. Environmental Science and Pollution Research, 29, 35110–35123. https://doi.org/10.1007/s11356-022-18715-z
8. Chavda, P., & Mehta, D. (2025). Assessing the impact of fossil fuel subsidies and environmental tax on renewable energy consumption of OECD countries: A panel quantile approach. Next Energy, 8, 100313. https://doi.org/10.1016/j.nxener.2025.100313
9. Chen, C., Pinar, M., & Stengos, T. (2020). Renewable energy consumption and economic growth nexus: Evidence from a threshold model. Energy Policy, 139, 111295. https://doi.org/10.1016/j.enpol.2020.111295
10. de Oliveira, H. V. E., Brasão, A. C., et al. (2025). Socio-economic drivers of renewable energy consumption: A dynamic panel analysis of rural and urban contexts in Europe. Energies, 18(24), 6475. https://doi.org/10.3390/en18246475
11. Grossman, G. M., & Krueger, A. B. (1995). Economic growth and the environment. The Quarterly Journal of Economics, 110(2), 353–377. https://doi.org/10.2307/2118443
12. Gygli, S., Haelg, F., Potrafke, N., & Sturm, J.-E. (2019). The KOF Globalisation Index – revisited. The Review of International Organizations, 14, 543–574. https://doi.org/10.1007/s11558-019-09344-2
13. IEA. (n.d.). Renewables and low-emissions fuels. International Energy Agency. https://www.iea.org/energy-system/renewables-and-low-emissions-fuels
14. IEA. (2024). Renewables 2024: Analysis and forecast to 2030. International Energy Agency. https://www.iea.org/reports/renewables-2024
15. IPCC. (2011). IPCC special report on renewable energy sources and climate change mitigation. Cambridge University Press. https://www.ipcc.ch/report/renewable-energy-sources-and-climate-change-mitigation/
16. King, R. G., & Levine, R. (1993). Finance, entrepreneurship and growth: Theory and evidence. Journal of Monetary Economics, 32(3), 513–542. https://doi.org/10.1016/0304-3932(93)90028-E
17. KOF Swiss Economic Institute. (n.d.). KOF Globalisation Index. ETH Zürich. https://kof.ethz.ch/en/forecasts-and-indicators/indicators/kof-globalisation-index.html
18. Lobonț, O. R., Bărbulescu, M. A., Criste, C., Ran, T., & Moldovan, N. C. (2025). Paying the price to power the future: Environmental taxation, energy transition, and Europe's Green Deal. Energies, 18(22), 5902. https://doi.org/10.3390/en18225902
19. OECD. (n.d.). Environmental tax [Data indicator]. https://www.oecd.org/en/data/indicators/environmental-tax.html
20. OECD. (2023). Methodological guidelines for environmentally related tax revenue accounts. OECD Publishing. https://doi.org/10.1787/d752d120-en
21. Ostadzad, A. H. (2025). Non-linear panel data analysis of financial development, R&D, economic complexity and renewable energy transition in OECD countries. Discover Sustainability, 6. https://doi.org/10.1007/s43621-025-01002-5
22. Pigou, A. C. (1920). The economics of welfare. Macmillan.
23. Porter, M. E., & van der Linde, C. (1995). Toward a new conception of the environment-competitiveness relationship. Journal of Economic Perspectives, 9(4), 97–118. https://doi.org/10.1257/jep.9.4.97
24. Sackitey, G. L. (2023). Do environmental taxes affect energy consumption and energy intensity? An empirical analysis of OECD countries. Cogent Economics & Finance, 11(1), 2156094. https://doi.org/10.1080/23322039.2022.2156094
25. Sasmaz, M. U. (2020). The relationship between renewable energy and human development in OECD countries: A panel data analysis. Sustainability, 12(18), 7450. https://doi.org/10.3390/su12187450
26. Sun, Z., Zhang, X., & Gao, Y. (2023). The impact of financial development on renewable energy consumption: A multidimensional analysis based on global panel data. International Journal of Environmental Research and Public Health, 20(4), 3124. https://doi.org/10.3390/ijerph20043124
27. United Nations. (n.d.). What is renewable energy? UN Climate Change. https://www.un.org/en/climatechange/what-is-renewable-energy
28. Urom, C., Abid, I., Guesmi, K., & Ndubuisi, G. (2022). Renewable energy consumption, globalization, and economic growth shocks: Evidence from G7 countries. Journal of International Trade & Economic Development, 31(2), 204–232. https://doi.org/10.1080/09638199.2021.1961845
29. Vo, D. H., & Vo, A. T. (2021). Renewable energy and population growth for sustainable development in the Southeast Asian countries. Energy, Sustainability and Society, 11, 30. https://doi.org/10.1186/s13705-021-00304-6
30. Wang, J., Zhang, S., & Zhang, Q. (2021). The relationship of renewable energy consumption to financial development and economic growth in China. Renewable Energy, 170, 897–904. https://doi.org/10.1016/j.renene.2021.02.038
31. Wang, Q., & Wang, L. (2020). Renewable energy consumption and economic growth in OECD countries: A nonlinear panel data analysis. Energy, 207, 118200. https://doi.org/10.1016/j.energy.2020.118200
32. Wolde-Rufael, Y., & Mulat-Weldemeskel, E. (2022). The moderating role of environmental tax and renewable energy in CO2 emissions in Latin America and Caribbean countries: Evidence from Method of Moments Quantile Regression. Environmental Challenges, 6, 100412. https://doi.org/10.1016/j.envc.2021.100412
33. World Bank. (n.d.). Domestic credit to private sector (% of GDP) [Data indicator FS.AST.PRVT.GD.ZS]. https://data.worldbank.org/indicator/FS.AST.PRVT.GD.ZS
34. World Bank. (n.d.). Renewable energy consumption (% of total final energy consumption) [Data indicator EG.FEC.RNEW.ZS]. https://data.worldbank.org/indicator/EG.FEC.RNEW.ZS
35. Xia, W., Apergis, N., Bashir, M. F., Ghosh, S., Doğan, B., & Shahzad, U. (2022). Investigating the role of globalization, and energy consumption for environmental externalities: Empirical evidence from developed and developing economies. Renewable Energy, 183, 219–228. https://doi.org/10.1016/j.renene.2021.10.084
36. Yadav, A., et al. (2024). Unravelling the role of financial development in shaping renewable energy consumption patterns: Insights from BRICS countries. Energy Strategy Reviews, 54, 101434. https://doi.org/10.1016/j.esr.2024.101434
37. Zhang, Y., Su, L., Jin, W., & Yang, Y. (2022). The impact of globalization on renewable energy development in the countries along the Belt and Road based on the moderating effect of the digital economy. Sustainability, 14(10), 6031. https://doi.org/10.3390/su14106031