Green Growth Nexus: Analysing Environmental Performance and GDP Trends in OECD Economies

Abstract Subject and Purpose of the Work Over the past two decades, OECD countries such as Italy, Germany, France, and the United Kingdom have experienced consistent economic growth, averaging 2% annually in GDP. This upward trend has been driven by various factors, including government spending, investment rates, and favourable global conditions. Recently, environmental performance has emerged as a critical factor influencing economic development. This study aims to examine the relationship between environmental performance indicators and GDP growth in selected OECD countries, focusing on the growing emphasis on environmental sustainability. Materials and Methods The analysis uses panel data from the OECD and World Bank, spanning 25 years (2000–2024), for four OECD nations. The study employs a Panel Autoregressive Distributed Lag (ARDL) model, which allows for the estimation of both short-run and long-run dynamics. GDP growth is the dependent variable, while the independent variables include environmental tax revenue (TAX), greenhouse gas emissions (EMI), air quality (QUA), government expenditure on environmental protection (EXP), and the share of renewable energy in total energy supply (REN). Results The empirical findings indicate that TAX and EXP have minimal positive impact on GDP growth, suggesting potential inefficiencies in the allocation or effectiveness of environmental funds. In contrast, other indicators such as air quality and renewable energy share show a stronger link with economic growth. Conclusion The study highlights the growing significance of environmental performance in shaping economic outcomes. It contributes to the sustainable development literature by demonstrating that targeted environmental efforts can positively influence long-term economic growth.