Financial Deepening as a Mediator of Environmental Taxes and Renewable Energy Consumption

Rabia Tuğba Eğmir and Kenan İlarslan

Politická ekonomie, vol. preprint, No 1715

Abstract: This study explores the effect of environmental taxation on renewable energy consumption, while considering financial deepening as a central element that may influence this relationship. Based on a dataset covering 27 European Union member states over the period 2014-2023, renewable energy consumption is included as the dependent variable, while environmental taxes are incorporated into the analysis as the main explanatory variable. In addition, gross domestic product and the human development index are incorporated into the specification as control factors. Financial deepening is specified as the threshold variable, and the empirical analyses are conducted using the panel threshold regression approach. Consequently, the effect of environmental taxes on renewable energy consumption is negative and varies in magnitude depending on whether the level of financial deepening falls below or exceeds the threshold value of 0.888. Finally, the results reveal that increases in gross domestic product and Human Development Index levels are associated with higher demand for renewable energy consumption.

Keywords: Renewable energy consumption; environmental taxes; financial deepening; panel threshold regression (search for similar items in EconPapers)
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DOI: 10.18267/j.polek.1566

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