Does environmental regulation restrict the level of carbon emissions? Evidence from the OECD countries

The combustion of fossil fuels has driven economic progress but caused severe environmental degradation. Stringent environmental policies and governance are vital to mitigating these effects. This study examines the Environmental Kuznets Curve hypothesis to analyze the impact of environmental policy stringency and governance on CO2 emissions in 27 OECD countries from 1996 to 2015, controlling for economic growth, globalization, and technological innovation using the PMG-ARDL estimation technique. Findings reveal that policies like the EU Emissions Trading System, carbon pricing in Sweden, Canada, and Germany, and clean energy transitions in Denmark and the Netherlands have significantly reduced emissions. Governance measures, including climate accountability laws and public-private initiatives in Japan, South Korea, and the USA, further reinforce emission reductions. Globalization exacerbates emissions but also supports mitigation through trade agreements with environmental clauses. Economic growth increases emissions, while technological innovation via clean energy R&D, EV subsidies, and smart grid investments curbs them. Strengthening carbon pricing, integrating climate goals into trade, expanding climate accountability laws, and investing in green infrastructure can further reduce emissions. Enhancing governance frameworks and sustainable finance policies, like the EU Taxonomy, is essential for long-term sustainability. This study underscore's role of robust policies and innovation in achieving environmental sustainability.Key Policy HighlightsStudy the impact of environmental policy stringency on CO2 emissions in 27 OECD countriesThe PMG-ARDL method is used over the balanced panel period from 1996 to 2015.The environmental policy stringency reduces CO2 emissions.Strengthening carbon pricing can reduce emissions.Enhancing governance frameworks are also essential for long-term sustainability.