Can Fiscal Decentralization Degrade the Urbanized Environment?

When government finances are decentralized, it may have both beneficial and bad effects on the economy as a whole. The present paper argues fiscal decentralization plays an important role in ensuring environmental sustainability while also favourably affecting other areas of government. There are, however, policy ramifications to address. First, local governments should be given more autonomy to develop environmental laws tailored to the unique environmental difficulties in their areas. Furthermore, in order to attain overall environmental sustainability, green energy must be adopted, and the central government should provide green energy programs to local governments while also overseeing their implementation at the local level. This may be accomplished by increasing the fiscal expenditures ratio in both the current and development domains. The Organization for Economic Co-operation and Development (OECD) suggests these strategies as well. In addition, a long-term strategy for cubing industries’ free-riding behaviour in order to minimize their carbon contributions should be proposed.