Re-visiting the Environmental Kuznets Curve: Unlocking the Ecological Roles of Environmental Taxes and Geopolitical Risk

Authors

  • Shiva Hallaji * Department of Financial Management, Science and Research Branch, Islamic Azad University, Tehran, Iran. https://orcid.org/0009-0003-3370-3423
  • Masoumeh Jafari Department of Financial Management, Karaj Branch, Islamic Azad University, Karaj, Iran.

https://doi.org/10.48313/iee.v1i3.64

Abstract

Environmental sustainability remains a critical challenge for the Organization for Economic Co-operation and Development (OECD), where advanced economic structures coexist with high levels of resource consumption and ecological pressure. This study contributes to the literature by integrating economic growth (GDP), environmental taxes (ETA), Geopolitical Risk (GPR), and technological innovations (TEI) within a unified framework, while emphasizing the novel moderating role of GPR on ecological sustainability, measured by the Load Capacity Factor (LCF). Using a balanced panel dataset of 38 OECD countries over the period 2010-2024, the study employs the two-step System Generalized Method of Moments (System GMM) estimator to address endogeneity and dynamic relationships. The findings reveal that GDP exhibits a nonlinear U-shaped relationship with environmental quality, initially reducing environmental quality and later improving it. ETA and TEI both contribute positively to environmental quality, highlighting the importance of fiscal instruments and innovation-driven transitions in promoting sustainability. GPR also shows a positive direct effect on environmental quality, suggesting that heightened uncertainty may reduce economic and industrial pressures. Importantly, the interaction effects indicate that  GPR  strengthens the positive impacts of both environmental taxes and technological innovation, amplifying their effectiveness in improving environmental quality within OECD economies. These findings suggest that environmental policies are more effective under higher  GPR  conditions, implying that policymakers should not weaken environmental commitments during periods of uncertainty.

Keywords:

Economic growth, Environmental taxes, Geopolitical risk, Technological innovations, Environmental sustainability

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Published

2025-09-12

Issue

Vol. 1 No. 3 (2025): Innovations in Environmental Economics

Section

Articles

How to Cite

Re-visiting the Environmental Kuznets Curve: Unlocking the Ecological Roles of Environmental Taxes and Geopolitical Risk. (2025). Innovations in Environmental Economics , 1(3), 246-257. https://doi.org/10.48313/iee.v1i3.64

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