Abstract

Eurostat and the European Environmental Agency have in 2019 reported there is still need to continue implementing zero-carbon practices in European Union (EU) Countries although there has been a noted decrease of 22% in emissions when compared to their 1990 levels. This paper employed a system-Generalised Method of Moments (GMM) framework to evaluate the environmental impacts of tax systems in selected 28 EU economies from 2010 to 2017. The results of the study proved that aggregate environmental tax is not effectively lowering greenhouse gas emissions as expected, although it improves environmental sustainability. Possibly the environment tax revenue collected in the European Union countries was not used to enhance energy efficiency; hence it could not lower greenhouse gas emissions. The other findings demonstrate that when environmental tax is disaggregated (energy tax and transport tax) these instruments have been more efficient in lessening emissions and also improves environmental sustainability (in the case of transport tax). The paper, therefore, highlights the importance of adopting green tax instruments which are more focused and harmonising directly with environmental goals for EU economies.

Highlights

  • Conversations on emission and its effects on the economy and environment are increasing especially in developed countries

  • The results further prove that economic growth, government expenditure, and eco-innovation show significant negative relationships to both emissions and environmental sustainability in the long-term

  • The first findings presented regression results when the aggregate environmental tax was employed. These outcomes show that total environmental tax, energy consumption, green research and development significantly heightened emissions in the short-run scenario

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Summary

Introduction

Conversations on emission and its effects on the economy and environment are increasing especially in developed countries. There is unanimity among researchers on the effect of emissions on the environment. Emissions cause environmental degradation, diseases, reduces household welfare and are detrimental to economic growth and development [1–3]. In this light, it is evident that climate change has become a global problem [4]. It is evident that climate change has become a global problem [4] This global problem has awakened the need for governments worldwide to invent techniques to minimise environmental issues and emissions. The significance of taxation on emission and environmental degradation has captured the attention of researchers and policymakers in developing policies and recommendations on minimising emission

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