How do governments actually use environmental taxes?

Isabelle Cadoret, Emma Galli and Fabio Padovano
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Isabelle Cadoret: Université Rennes 1, CNRS, CREM - UMR6211, Condorcet Center for Political Economy, France
Emma Galli: DiSSE, Sapienza University of Rome, Rome Italy

Economics Working Paper from Condorcet Center for political Economy at CREM-CNRS from Condorcet Center for political Economy

Abstract: This paper empirically examines how governments actually use environmental taxes, by looking to what extent their resort to this type of taxation is consistent with three alternative interpretations of environmental taxes proposed by the welfare economics theoretical literature: the strict and the loose Pigouvian and the double dividend hypotheses. We also extend our analysis to an alternative vision of politics, the Leviathan model, to verify how governments that are imperfectly accountable use environmental taxes. Each theory leads to alternative testable hypotheses, which we verify on a sample that minimizes the analysts’ discretionary evaluations, the EU-28 countries that committed themselves to reducing the greenhouse gas emissions by 2020. The estimates lend support to the strict Pigouvian hypothesis and, to a lesser extent, to a version of the double dividend hypothesis, where personal income taxes are “recycled” by environmental ones. The other interpretations do not appear consistent with the data.

Keywords: Environmental taxes; environmental policy goals; Pigouvian taxation; double dividend hypothesis; Leviathan government; dynamic simultaneous equations model. (search for similar items in EconPapers)
JEL-codes: D72 D73 D78 H54 H87 Q28 (search for similar items in EconPapers)
Date: 2018-01
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Journal Article: How do governments actually use environmental taxes? (2020)
Working Paper: How do governments actually use environmental taxes? (2020)
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