Sustainable development and climate action: The role of tax policy and innovation

Climate change has occasioned sluggish growth in critical sectors of economies, hindering the achievement of the global sustainable development goals. With this, the current study comprehensively explores the role of government environmental tax policy, technological innovations, natural resource and forest areas protection, and urbanization on climate change mitigation, taking cognizance of the need to take urgent action to achieve SDGs 09 and 13. Considering panel data from 16 developing countries from the BRI region and using a novel Fourier-based approach, the study established government tax policy, natural resources, and forest area protection as significant elements that can lead to the global response to climate change mitigation. The study underscores the need for fiscal policy frameworks that support the effective implementation of government tax policies and natural resource protection. The FARD long-run results showed that government environmental tax policy positively impacts climate resilience by 6%, while natural resources rent negatively influences climate change by 19%. Green technological innovations were found to play a less impactful role of 2%. The Single Fourier-frequency Toda-Yamamoto Causality Test results confirmed the causality between the variables, highlighting government tax policies and natural resources protection as strong instruments for climate change mitigation. By strengthening environmental taxes and environmental expenditures, developing countries will be able to reduce their carbon emissions and dependence on natural resources, enhancing various actions on combating climate change, potentially moving towards achieving SDGs 09 and 13 by 2030.