The Role of Environmental Economics Tools in promoting Economic Growth in Developed Countries: A study of selected Advanced Economies
Keywords:
Environmental Economics, Environmental Taxes, Investment in Renewable Energy, Environmental Jobs, Industrial Competitiveness, Green Industries.Abstract
This study examines the impact of environmental economics instruments on sustainable economic growth in selected developed countries (Germany, Denmark, Sweden, and Japan) during the period (2010–2024). It analyzes the relationship between environmental taxes, green investment, environmental employment, and industrial competitiveness on one side, and gross domestic product (GDP) on the other. The research employs the descriptive–analytical method and the Autoregressive Distributed Lag (ARDL) model to measure both short- and long-run relationships among the variables.
The results show that all variables are integrated of the first order, confirming the suitability of the ARDL model. A long-run equilibrium relationship exists between environmental instruments and economic growth. Environmental taxes have a negative long-run and a positive short-run effect on growth, while green investment exerts a weakly positive influence. Environmental employment and industrial competitiveness are statistically insignificant. The error correction coefficient indicates a stable long-run adjustment, with about 21% of short-run deviations corrected annually.
The study concludes that environmental economic policies can support growth when implemented within a balanced framework combining taxation and investment incentives.
