The impact of Economic development on climate change and Fiscal Policy as a measure of improving the environment quality

Abstract

This research investigates the impact of economic development on climate change and how fiscal policies can be used as a tool to improve the environmental quality. The study examines the relationship between economic development and environmental degradation focusing on CO2 emissions, utilizing the Environmental Kuznets Curve (EKC) hypothesis. For the investigation, data from 50 countries between 1990 and 2022 was used. The results, showed an inverted U-shaped relationship between economic development and carbon dioxide emissions, thus, the findings support the EKC hypothesis. The study also examined the effect of fiscal policies on the environmental sustainability; however, the results showed a non - statistically significant relationship, implying insufficient evidence to assert a definitive impact. The study comes to the conclusion that while the economic development initially raises carbon dioxide emissions, eventually lowers emissions beyond a certain point.