The role of environmental taxes and economic growth in driving fossil fuel consumption: fresh evidence from CS-ARDL and DCCE approaches for OECD countries

BOZATLI O.

Applied Economics Letters, 2025 (SSCI, Scopus) identifier

  • Publication Type: Article / Article
  • Publication Date: 2025
  • Doi Number: 10.1080/13504851.2025.2584494
  • Journal Name: Applied Economics Letters
  • Journal Indexes: Social Sciences Citation Index (SSCI), Scopus, IBZ Online, ABI/INFORM, EconLit, Geobase, Public Affairs Index
  • Keywords: economic growth, Environmental taxes, fossil fuel consumption, OECD
  • Azerbaijan State University of Economics (UNEC) Affiliated: No

Abstract

This study investigates the impact of environmental taxes and economic growth on fossil fuel consumption using recent panel data techniques with data covering the period 1994–2022 for 33 OECD countries. The findings indicate that environmental taxes and economic growth increase fossil fuel consumption. However, nonlinear model tests also imply the existence of an inverted U-shaped relationship between economic growth and fossil fuel consumption. Accordingly, while economic growth increases fossil fuel consumption up to a certain threshold, this effect reverses after a turning point. Robustness checks confirm the validity of the main findings and reveal that renewable energy consumption reduces fossil fuel consumption, but trade openness has no significant effect.