Does the composition of environmental regulation matter for ecological sustainability? Evidence from Fourier ARDL under the EKC and LCC hypotheses

Abstract

Environmental policies typically involve the definition of a goal and the use of some policy tools to achieve this goal. As one of the most critical objectives of countries is to ensure environmental sustainability, they use effective instruments such as environmental regulations, which are important public economy instruments. This study aims to test the impact of environmental regulations on the load capacity factor and ecological footprint in Turkey using data from 1990 to 2020 and the novel Fourier augmented autoregressive distributed lag (ARDL) model. We categorize environmental regulations into market-based, command and control, and technology support policies. This reveals the relative effectiveness of environmental regulation components. We also question the role of renewable energy and the validity of the environmental Kuznets curve (EKC) and Load Capacity Curve (LCC) hypotheses. The findings indicate that market-based regulations increase environmental sustainability by improving environmental quality. Again, command and control and technology support policies have no impact on the ecological balance. Therefore, we prove that the components of environmental regulations can have different impacts on environmental quality and sustainability. Moreover, we confirm the improving role of renewable energy on environmental quality. Thus, we support the view that environmentally friendly renewable energy policies are critical for environmental sustainability. Finally, we show that the EKC and LCC hypotheses are valid in Turkey during the analyzed period. Policymakers must restructure command and control regulations and technology support policies in an incentive-based, flexible, and cost-effective manner to improve environmental quality in Turkey.