The Effect of Green Taxation and Economic Growth on Environment Hazards: The Case of Malaysia

Nanthakumar Loganathan, Muhammad Shahbaz and Roshaiza Taha

MPRA Paper from University Library of Munich, Germany

Abstract: This paper explores how carbon taxation and economic growth affect environment hazards in Malaysia using time series data over the period of 1974-2010. We applied cointegration and causality approaches to determine long term and the direction of causal relationship between these variables. Based on the results, we found the cointegration relationship between the variables. Furthermore, we noted that Kuznets’ theory i.e. inverted-U shaped curve between economic growth and CO2 emissions is valid for Malaysia but the carbon taxation policy is ineffective to control CO2 emissions. The causality analysis revealed that there is bidirectional relationship is found between carbon tax and CO2 emissions. Economic growth Granger causes CO2 emissions and carbon tax is Granger cause of economic growth. To enhance the awareness on pollution issues governments should rely on alternative instruments, which may give benefit not only to taxpayers but also to reduce pollution, which is the pivotal issue to be tackle globally.

Keywords: economic growth; environment hazards (search for similar items in EconPapers)
JEL-codes: C1 (search for similar items in EconPapers)
Date: 2014-06-16, Revised 2014-06-23
New Economics Papers: this item is included in nep-ene, nep-env, nep-gro, nep-pbe and nep-sea
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

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