An environmental impact assessment of fossil fuel subsidies in emerging and developing economies

By Sakiru Adebola Solarin. 2020

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Abstract The impact of fossil fuel subsidies on environmental degradation has not been adequately examined in the existing literature. However, environmental degradation is often suggested as one of the causes of climate change. This paper examines the factors driving environmental degradation, emphasising the role of fossil fuels, in 35 emerging and developing countries. The ecological footprint is used as a proxy for environmental degradation. Using Generalized Method of Moments (GMM), the results show that an increase in fossil fuel subsidies leads to an increase in ecological footprint. Specifically, a 10% increase in fossil fuel subsidies will increase the ecological footprint by between 0.3% and 1.5%. The results further suggest that variables such as population size, real GDP per capita, urbanisation and the non-dependent population also boost environmental degradation. It is also shown that primary energy supply per capita, industry share, resource rent and globalisation have a positive effect on environmental degradation. However, the global oil price and human capital development do not have a significant impact on environmental degradation. The implications of these empirical findings are analysed in the paper.

Subfields: Economics and Econometrics, Environmental Engineering, Renewable Energy, Sustainability and the Environment

View Paper: https://www.semanticscholar.org/paper/15a538b671e5badc844269721c80b6bda623b90f