Beyond fossil fuels: How Iceland's oil efficiency, hydro energy, and fiscal decentralization propel a cleaner environment: Evidence from wavelet quantile methods

This study investigates Iceland's multifaceted approach to environmental sustainability from 1999Q1 to 2021Q4, focusing on oil efficiency, hydro energy, and fiscal decentralization as key drivers for reducing carbon emissions and enhancing ecological resilience. Iceland's abundant renewable energy resources, particularly hydro energy, have enabled a significant shift away from fossil fuels, establishing the nation as a global leader in green energy. By examining Iceland's emphasis on energy efficiency, particularly within oil-dependent sectors such as transportation and fishing, this study highlights how targeted efficiency improvements can reduce CO2 emissions while maintaining economic productivity. Additionally, Iceland's model of fiscal decentralization empowers local authorities to implement customized environmental policies, allowing for greater adaptability in managing regional ecological challenges. This decentralized approach not only promotes community engagement but also enhances accountability in meeting sustainability targets. Using wavelet quantile regression (WQR) and quantile-on-quantile Granger causality (QQGC), we analysed the dynamic interactions among these factors over time, revealing their varied impacts on CO2 emissions. Findings demonstrate that Iceland's integration of renewable energy, oil efficiency, and fiscal decentralization offers a replicable framework for countries aiming to transition toward a low-carbon economy. This study provides actionable insights into how decentralized governance and renewable energy strategies can collectively advance global sustainability goals, as the policy remarks.