The Impact of Democracy on Environmental Degradation in OECD Countries

Environmental degradation and its determinants have been extensively discussed in the literature. With the literature mostly focusing on the economic determinants of environmental degradation, such as, economic growth, openness, and globalization. However, the political determinants of environmental degradation are also significant for a sustainable environment. The theoretical approaches differ in this context, with some studies claiming that democracy reduces environmental degradation, while others argue that democracy increases it. Therefore, one can say that no consensus exists among the approaches explaining the relationship between democracy and the environment with regard to how democracy impacts the environment. One of the main goals of this study is to focus on the political components of environmental degradation, such as, democracy. This study additionally investigates the impact of democracy on environmental degradation within the scope of theoretical approaches. Within this context, the study tests the impact of democracy on greenhouse gas emissions per capita in 37 OECD countries for the period of 1995-2018. In order to do this, the study first tests cross-sectional dependence and homogeneity across the variables. The results show the presence of both cross-sectional dependence, as well as slope heterogeneity between the variables. Therefore, the common correlated effects mean group (CCEMG) estimator, is used, as it takes cross-sectional dependence and heterogeneity into consideration. According to the results, democracy is positively related to environmental degradation. In other words, an increase in the level of democracy increases greenhouse gas emissions per capita, whereas higher levels of renewable energy consumption reduce greenhouse gas emissions.