Does public debt hinder transport decarbonization? Theoretical analysis and empirical evidence

Source abstract

Transport CO 2 emissions have become one of the fastest-growing sources of global greenhouse gases, posing a major challenge to sustainable development. This study examines whether, and under what conditions, public debt supports or hinders transport-sector decarbonization. We extend the debt-environment model to the transport sector, demonstrating a nonlinear U-shaped long-run relationship between public debt and transport CO 2 emissions, and test it using a panel CS-ARDL approach for 31 economies from 2000 to 2021. The empirical results support a nonlinear U-shaped long-run relationship between public debt and transport CO 2 emissions. Additionally, transport-related climate change mitigation technologies and environmental taxes significantly reduce emissions, suggesting their potential as effective strategies for transport decarbonization. Heterogeneity analysis reveals lower debt thresholds for low-growth and politically unstable economies. Overall, by integrating fiscal and transport sustainability within a unified theoretical framework, this study provides novel evidence and practical policy insights for designing debt-sustainable, climate-aligned transport strategies.