What question did this study set out to answer?

The study aims to explore how fiscal policies and renewable energy reduce pollution costs in Mediterranean countries.

February 28, 2026Carbon Research1 citationsOpen Access

Fiscal-energy synchronization and pollution cost reduction in MEDI-6 countries: a novel modeling approach

DMDhyani MehtaPandit Deendayal Petroleum University NPNikunj PatelNirma University

Key Points

The study aims to explore how fiscal policies and renewable energy reduce pollution costs in Mediterranean countries.
Examined trends in fiscal instruments and renewable energy from 2000–2023.
Utilized the Kuramoto Dynamic Model to analyze synchronization of tax revenues and energy policies.
Applied Cross Sectionally Augmented Nonlinear Autoregressive Distributed Lag model for asymmetric responses.
Increased eco-coherence correlates with lower pollution costs.
Renewable energy consumption has the most significant impact on overall system coherence.
Decreases in renewable usage resulted in a more significant negative impact on pollution costs compared to equivalent increases.

Abstract

Abstract The study examines the dynamic relationship of fiscal instruments, renewable energy consumption and cost of pollution in six Mediterranean economies (France, Italy, Malta, Slovenia, Greece and Croatia) over 2000–2023. Moving beyond conventional emissions-based metrics, pollution cost is employed as a comprehensive indicator of environmental and economic burden. Both an evidential analysis, through the integration of the Kuramoto Dynamic Model (KDM) used to determine the synchronization among environmental tax revenues, environmental protection spending, and renewable energy consumption, in terms of policy and coherence of energy markets has been undertaken, and synchronization has been linked to cost of pollution through a feedback loop, to measure how the conscious and coordinated fiscal energy policies would affect the amount of economic benefits derived from relaxing environmental damage. The feedback loop to the eco-coherence is implemented in a Cross Sectionally Augmented Nonlinear Autoregressive Distributed Lag (CS NARDL) to observe the asymmetric short-run and long-run responses on pollution cost to positive and negative shocks from the three instruments. The results are that greater eco-coherence leads to lower pollution costs, with renewable energy consumption having the greatest level of influence on the system eco-coherence. The asymmetric estimation indicates that decreases in renewable energy consumption or fiscal measures have a more negatively asymmetric influence on pollution cost in comparison to the gains achieved with an equivalent increase, indicating the risk of political retractions of fiscal policies. This combined modelling approach represents a different perspective on measuring environmental policy effectiveness, emphasizing sustained, aligned fiscal commitment, and adopting renewable energy. Policy implications suggest a need for regional alignment to secure any gains from alignment, and to protect against deterioration that could erode environmental and economic advancement. Graphical Abstract

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