Carbon Tax Policies and Their Effectiveness in Reducing Greenhouse Gas Emissions

Abstract

The broad objective of this study is to investigate the effect of carbon tax policies on the reduction of greenhouse gas emissions in Nigeria, using quarterly time series data ranging from 2000 to 2023. The dependent variable of the study is greenhouse carbon emission, while the core independent variables are carbon intensity of gross domestic product (proxy for tax policies in Nigeria), real gross domestic product, renewable energy, institutional quality, manufacturing sector output, and interest rate. The method of estimation employed in the study is the Ordinary Least Square and the Engel Granger Causality test. The findings from the study revealed that, carbon intensity of gross domestic product and real gross domestic product is positively and significantly impacting on greenhouse gas emissions in Nigeria. Renewable energy, institutional quality, manufacturing sector output and interest rate are negatively but significantly impacting on greenhouse gas emissions in Nigeria. The study further revealed that carbon intensity of gross domestic product and greenhouse gas emission do not have any directional causal relationship. Based on these findings, the study recommends that carbon tax policies in Nigeria should be restructured, the carbon tax revenues should be earmarked for renewable energy development, governance, enforcement and transparency should be improved, and government should consider the efficient adoption of green monetary policies.