The effects of environmental taxes on environmental pollution in the member states of the European Union

Snežana Ugrinov

Economic Systems, 2025, vol. 49, issue 3

Abstract: This paper examines the effectiveness of environmental taxes as a potential instrument for mitigating climate and environmental problems. The relationship between environmental taxes and indicators of air quality and environmental protection is examined with a sample of 28 countries (26 member states of the European Union, Norway, and Iceland) in the period 1996–2022. The dynamic panel models are estimated using the system–generalized method of moments proposed by Blundell and Bond (1998), as it is suitable for addressing potential endogeneity issues. Empirical analysis reveals that total environmental taxes are generally associated with a decline in greenhouse gas emissions and air pollution. Energy taxes appear to be the most effective type, as an increase of 1 percent in these taxes is associated with a reduction in total greenhouse gas (GHG) emissions of 0.5 percent for three prior years. In particular, energy taxes are effective for decreasing carbon dioxide (CO2) emissions as well for other kinds of emissions and air pollutants. However, there is not enough evidence to confirm the contribution of transportation taxes and taxes on pollution and resource use to an overall decline in emissions and air pollution. This study contributes to the literature by providing ex-post empirical evidence on the effectiveness of environmental taxes in reducing GHG emissions and improving air quality in several European countries.

Keywords: Energy taxes; Environmental pollution; Environmental taxes; EU countries (search for similar items in EconPapers)
JEL-codes: H23 Q53 Q58 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecosys:v:49:y:2025:i:3:s0939362525000202

DOI: 10.1016/j.ecosys.2025.101308

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