Abstract
In this paper we study the effectiveness of environmental taxes and policies of the regional level of government to reduce GHG emissions. We use panel data for the 17 Spanish regions in the period 1999–2017, controlling the spatial nexus between regions and using a dynamic Durbin model. The results show there is spatial dependence and spatio-temporal persistence of GHG emissions at the regional level in Spain, and that in this context, the taxes and policies intended to manage emissions introduce a slight disincentive to generating them. This fact, together with some relative decoupling which seems to exist between growth and emissions at the regional level, would suggest the need for tougher measures to combat environmental pollution in order to meet EU commitments.
Highlights
Most governments have traditionally preferred to use “command and control” regulations to protect the environment
To take into account that the effect environmental policies can have on emission levels will not be immediate [7,52,53], we have lagged one period our tax variables (EMTAX and ENVTAX), and the environmental investments and spending we use as proxies for environmental policies (EMINV, ENVEXP)
According to the model selection procedure proposed by Elhorst [38] and usually used in the literature [11,30,31,32,33,34], based on the test for absence of spatial autocorrelation in the error term (LM error), presence of spatial autocorrelation in the lagged dependent variable (LM lag) and no general spatial autocorrelation (LM SAC), which can be seen in Table A4 of the Appendix A, the right model for explaining greenhouse gas emissions (GHG) emissions in the Spanish regions would be the dynamic spatial Durbin model; in other words, we would have to take into account spatial autocorrelation in the endogenous variable and in the explanatory variables
Summary
Most governments have traditionally preferred to use “command and control” regulations to protect the environment. The only paper at the regional level which monitors spatial nexus and the dynamic nature of emissions, and includes a variable with some similarity to environmental tax policy, is by Zhang et al [36], which includes, as an explanatory factor, the industrial SO2 removal rate as a proxy for carbon emission reduction policies or intensity of environmental policy For this reason, the goal of our paper will be to analyse empirically whether the environmental policy of regional governments, and their emissions taxes, are effective in reducing emissions, taking into account the spatial nexus in emissions and in environmental policy, as well as the fact that air emissions show persistence over time.
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