The effects of fiscal policy on CO2 emissions: Evidence from the U.S.A.

The effects of fiscal policy on CO2 emissions: Evidence from the U.S.A. Energy Policy 88: 317-328 (SCOPUS, ISI Listed. Impact factor: 2.575 and 5-year: 3.394). In common with E. Paizanos (2016).

This paper examines the effects of fiscal policy on air quality using U.S. quarterly data from 1973 to 2013. In particular, we analyze the short-term and mid-term interactions between fiscal policy and CO2 emissions, by using sign restrictions to identify the policy shocks. We construct the impulse responses to linear combinations of fiscal shocks, corresponding to the scenarios of deficit-financed spending and deficit-financed tax cuts. To take into account possible variations of the effect of fiscal policy according to the sources of pollution, we distinguish between production- and consumption- generated CO2 emissions. The results point out that the implementation of expansionary fiscal spending provides an alleviating effect on both pollutants, whereas deficit-financed tax cuts are associated with a deteriorating effect on consumption generated air pollution. The exact pattern of the effect depends on the source of emissions, the scenario of fiscal policy and the functional classes of government expenditure being increased.