Promoting Sustainable Energy Transition: Assessing the Interplay of Environmental Taxes, Energy Aid, and Governance Quality

Abstract

Fossil fuel consumption, a leading cause of climate change and environmental degradation, necessitates a shift towards cleaner and more sustainable energy sources. However, energy transition is not without its challenges, including financial constraints, policy design, and governance deficiencies. To address these issues, nations have adopted environmental fiscal policies such as environmental taxes and energy development assistance, while also concentrating on enhancing the robustness of governance structures. This thesis explores the impact of these measures on the energy transition process through three related research papers. The first paper assesses the effects of carbon tax policy on energy transition-related environmental and socio-economic outcomes using a quasi-experimental design. The second paper investigates the impact of energy development assistance and governance quality on environmental tax efforts in Sub-Saharan Africa using instrumental variable regression techniques. The third paper examines the threshold effects of energy development assistance on energy transition efficiency, with a focus on the role of accounting and governance quality. Key findings include that carbon tax policy can promote energy transition by reducing emissions from energy consumption, improving energy intensity, increasing renewable energy adoption, and enhancing welfare. Additionally, findings suggest that energy development assistance should be context-specific, complementary, and coherent to support environmental taxation and the energy transition of aid recipient countries. Similarly, the findings reveal that energy development assistance can be effective if used in moderation and in conjunction with good accounting and governance practices. These findings have important policy implications for countries seeking to transition to cleaner and more sustainable energy sources.