Abstract:

Different policy measures are taken around the world to overcome environmental problems, ensure sustainable development and economic growth. On the other hand, fossil fuels still have an important input in production and consumption. In the current literature, many different variables determine environmental degradation and economic growth. This study aims to examine the impact of fossil fuel subsidies on both environmental degradation and economic growth. This study considers a balanced panel of G20 countries in the period 2010-2017. Driscoll and Kraay (1998) standard error methodology is used for empirical analysis in the study. The result reveals that fossil fuel subsidies significantly increase environmental degradation, whereas per capita income, renewable energy use, environmental technologies and trade openness reduce environmental degradation. Moreover, the result reveals that fossil fuel subsidies significantly reduce economic growth, whereas renewable energy use, environmental related technologies increase economic growth. This study is important in terms of addressing the impact of fossil fuel subsidies on environmental degradation and economic growth. By shifting the subsidies they have provided to fossil fuels to renewable energy sources, health, education and infrastructure investments, policy makers will both overcome environmental problems and alleviate the financial burden on the economy.

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