An assessment of the environmental sustainability corridor: Investigating the non-linear effects of environmental taxation on CO2 emissions

The effectiveness of environmental taxes for achieving carbon abatement has been subject to important debates on the sustainable development pathway. Theoretically, it is expected that environmental taxation (ERT) can reduce carbon emissions by enhancing innovation and energy efficiency that are the main drivers of environmental sustainability. The purpose of the study is to investigate the non-linear effects of ERT on carbon dioxide (CO2) emissions by controlling environmental technologies, patens and economic growth within the limitation of the available longest data set covering the period of 1994-2015. The study employs the panel smooth transition regression approach, which determines the threshold levels endogenously, by observing the lower and higher integration levels of countries through globalization as a transition variable. The empirical findings recommend that ERT decreases CO2 emissions at higher levels of globalization. The non-linear effect of environmental-related technologies and patents on CO2 emissions is also favourable at higher levels of globalization.