The Neighborhood Effects of National Climate Legislation: Learning or Competition?

Abstract

This study aims to explore the spatial spillover effects of national climate legislation on carbon emission reduction by using cross-country panel data from 2002 to 2021. The results show the following: First, the estimation outcomes confirm the presence of spatial correlations between carbon dioxide emissions and climate legislation across countries. Second, the study shows that the spillover effect of climate legislation on CO2 emissions is significantly negative. Hence, the outcomes indicate that being surrounded by nations with more climate laws positively impacts environmental quality. Third, regarding direct impact and spillover effects, the carbon reduction impact of parliamentary legislative acts is stronger than that of governmental executive orders. Finally, even with the spillover effect, we uncover robust evidence supporting an inverted-U-shaped EKC linkage between carbon emissions and GDP per capita, even under the spatial spillover effect.