Role of Market and Nonmarket-Based Environmental Policies, Energy Use, and Income on Environmental Sustainability: The Case of G7 Countries

Abstract

Because the role of stringent environmental policies, energy use, and eco-friendly economic growth is highly critical in combating climate-related problems and preserving environmental quality, this study uncovers the incremental impact of aforementioned factors on load capacity factor (LCF) in G7 countries between 2000 and 2020 by performing a kernel-based regularized least squares (KRLS) model. The outcomes show that (i) gross domestic product (GDP) has only a supporting impact on LCF in the USA; (ii) market-based environmental policies are beneficial in Canada, France, Japan, and the USA; (iii) nonmarket-based environmental policies are helpful in France and USA; (iv) renewable energy use has positive support in Germany, Italy, Great Britain, and USA; (v) fossil energy use is harmful in all countries; (vi) the KRLS model has a high prediction performance; (vii) with regarding to G7 countries, the USA has the most positive condition. Thus, the study empirically highlights the average and pointwise incremental impact of the factors considered on LCF across countries and percentiles. Accordingly, the study discusses various policy options, such as mainly focusing on market-based environmental policies through making required regulations, considering also nonmarket-based environmental policies as a supportive mechanism, relying on further use of renewable energy through support packages and incentives, which should be taken into account in case of any additional measures application in the environmental area.