Relationship Between Fiscal Policies and Green Economy: An Application for G20 Countries

Introduction

Today, in addition to military, political, social and economic problems, the world faces many environmental issues. Rapidly increasing population, urbanization, economic activities and consumption habits increase the pressure on the environment and natural resources. Problems related to environmental pollution, climate change, desertification, deforestation, water scarcity and global warming continue to increase day by day and reach the stages that threaten human life. In the twentieth century, human activities have reached a level that might change the ecological structure of the world. Fossil fuels used for high amounts of production have caused intense carbon emissions. Especially after the Second World War, the negative impact of emission indicators on the climate is quite high (Chichilnisky, 1997, p.467). Carbon emissions worldwide have tended to decrease since 2010 compared to previous periods due to the economic slowdown following the 2008 financial crisis, strengthened climate policies, increase in the use of cleaner energy sources and technological developments. The decrease in human activities due to the COVID-19 epidemic in 2020 also caused carbon emissions to decrease at certain rates, but by 2021 they approached pre-pandemic values (OECD, 2023). The fact that climatic changes in recent years have occurred at record levels is proof that a new era awaits the world. Carbon emissions from fossil fuel use and industrial processes account for two-thirds of current greenhouse gas emissions and are the most significant factor contributing to the overall increase. Emissions of methane, nitrous oxide (N2O) and fluorinated gases (F-gases), which have a higher global warming potential and account for approximately a quarter of current greenhouse gas emissions, also continue to increase rapidly (UNEP, 2023).

Global warming and climate changes deeply affect social and economic life accross the world. However, the concerns that economic growth will slow down around the world due to the measures to be taken lead countries to be reluctant in this regard. In the meantime, failure to observe environmental balance brings the risk of reducing growth potential in the long term and facing greater disasters with it. G20 countries represent 85% of the world population and 65% of world GDP. Therefore, the impact of countries in this group on global climate crises is extremely high. The environmental measures these countries will take and the policies they will implement are at a level that can prevent environmental and climate disasters that may occur in a global scale. Greenhouse gas emissions across the G20 increased by 1.2 percent in 2022. Moreover, members' dispositions on this issue vary greatly. While an increase in greenhouse gas emissions is observed in China, India, Indonesia and the United States, a decrease is observed in Brazil, the European Union and the Russian Federation. When evaluated collectively, G20 countries are responsible for 76 percent of global emissions (UNEP, 2023). While global greenhouse gas (GHG) emissions must decrease by 45% in order to limit the global temperature increase to 1.5%, the emissions are expected to increase by 10.6% by 2030. G20 countries are emitting the equivalent of 7.4 to 7.7 tonnes of CO2 per person on average each year. To keep the increase below 1.5 °C, they must at least halve this to between 2.9 to 3.8 tonnes per person by 2030. (OXFAM, 2023). In their declaration made in New Delhi in September 2023, G20 countries made statements about the green economy and sustainable future. They stated that they would be integrated into environmentally sustainable and inclusive economic growth and development for the well-being of future and present generations. They committed to accelerate their actions to find solutions to climate change and environmental crises. They underlined that they would fully and effectively implement the Paris Agreement and continue to fight against climate change with determination (G20, 2023).

In the present study, firstly, in the background section, global regulations on green economy and sustainable development are discussed and current results on this subject are included. Then the main focus of chapter is presented. Later, the related literature is reviewed in the literature on fiscal policy and the green economy section. In the data and methodology section, the data employed in the analysis and methodology are discussed. The future directions in research section includes recommendations for future studies; the analysis findings are presented in the empirical findings section, and the conclusion section includes comments and evaluations.