Spatial Patterns in Fiscal Impacts of Environmental Taxation in the EU

Vít Pászto,Judit Sági,Jolana Skaličková,Jarmila Zimmermannová

doi:10.3390/economies8040104

Vít Pászto, Judit Sági + Show 2 more

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https://doi.org/10.3390/economies8040104

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Abstract

There are several reasons for environmental taxation implementation. Besides its environmental impact, the main reason for such taxation is its fiscal impact, particularly in generating revenues of public budgets. The main goal of this paper is to observe possible spatial patterns in fiscal impacts of environmental taxation in the EU countries, and to depict the groups of countries with the same (or similar) fiscal impact of these instruments on public budget revenues, including environmental and economic characteristics. Two methods of cluster analysis are used, Ward linkage and K-nearest neighbors (spatial) cluster analysis to observe potential geographical links or implication of fiscal impact. The study is performed for the years 2008 and 2017. Based on the results, we can say that in the year 2008, the EU countries were divided into “the west” and “the east”, with some exceptions. The western countries were characterized by high environmental tax revenues, the eastern countries by low environmental tax revenues. For 2017, the situation is different. The border between old and new EU member states is not so abrupt and clear. The results show higher diversification between EU countries concerning the fiscal impacts of environmental taxation.

Highlights

Raising revenues and addressing climate change are two fundamental challenges facing governments (Barrage 2020)
Concerning this document, our research focuses on observing characteristics of environmental tax revenues in European Union (EU) countries to find possible groups of them
The economic power of the country is represented by GDP in EUR per capita (Eurostat 2020); environmental aspects are described by greenhouse gas emissions in tons per capita (Eurostat 2020)

Summary

Introduction

Raising revenues and addressing climate change are two fundamental challenges facing governments (Barrage 2020). The European Union (EU) member states use various economic instruments of environmental/climate protection. Environmental taxes should play an essential part in environmental policy as they help to internalize externalities, reduce damage and increase the quality of life; they allow for the raising of revenue for national and local governments (Jurušs and Brizga 2017). Besides their environmental impact, the main reason for these economic instruments’ implementation is their fiscal impact—namely, the revenues of public budgets (OECD 2016). The EU has increasingly favored such instruments because they provide flexible and cost-effective means of reinforcing the polluter-pays principle and for reaching environmental policy objectives

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