Assessing the Impact of Environment Tax on Carbon Emissions of African Countries

Dhyani Mehta and Valentina V. Derbeneva

Journal of Tax Reform, 2024, vol. 10, issue 3, 510-523

Abstract: Over the past decade, African nations have seen substantial economic growth and rising global influence, yet carbon emissions in the region have increased since 1995. In response, several African countries have implemented environmental taxes to curb emissions and prevent environmental degradation. This study investigates the impact of environmental taxes and economic growth on carbon emissions in AFRICA-13 countries, using nonlinear quantile regression, FMOLS, and DOLS methods on panel data from 1995 to 2023. The findings reveal a significant relationship between environmental taxes, economic growth, and carbon emissions. Specifically, the negative and significant coefficients for environmental taxes suggest that higher taxes are effective in reducing carbon emissions. On the other hand, the positive and significant coefficients for manufacturing and national income – indicators of economic growth – indicate that as economic growth increases, so do carbon emissions, aligning with the Environmental Kuznets Curve (EKC) hypothesis. While AFRICA-13 countries have implemented policies to address environmental challenges, the link between economic growth and increased emissions underscores the ongoing challenge of balancing development with environmental sustainability. This study provides new insights into the effectiveness of environmental taxes, demonstrating that they serve as effective counter-incentives for polluting activities and contribute to emission reductions. The experiences of the AFRICA-13 countries offer valuable lessons for global policymakers, illustrating how fiscal policy can be leveraged to rebalance the energy mix and promote the use of cleaner alternative energy sources while addressing the dual objectives of economic growth and environmental protection.

Keywords: Africa; environment tax; economic growth; carbon emissions; quantile regression; FMOLS; DOLS (search for similar items in EconPapers)
JEL-codes: G2 G23 O3 O32 Q5 Q53 Q58 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:aiy:jnljtr:v:10:y:2024:i:3:p:510-523

DOI: 10.15826/jtr.2024.10.3.181

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