Abstract
Abstract The influence of taxation on the economy and society is everywhere. Given the fact that CO2 emission is closely connected with human activities, the question naturally arises whether the tax burden affects the carbon emissions. To address this issue, based on the data of 21 OECD countries over the period from 1991–2014, we use the ratio of tax revenue to GDP as a proxy of the tax burden and employ a panel quantile model with the non-additive fixed effects for analysis. The results suggest that the impact of the tax burden on carbon emissions is heterogeneous across countries based on the level of carbon emissions. Moreover, we find a stable U-shaped relationship between the tax burden and carbon emissions whether for countries with a high or low level of carbon emissions. Our findings suggest that moderate taxes could help reduce carbon emissions, but the effect of excessive taxation is the opposite.
Highlights
J=1 where ln CO2it is the natural logarithms of CO2 emission for i country at t year; βit is the parameter of independent variables, Dit is the set of explanatory variables, here, model contains seven explanatory variables: tax burden (Tax) and its quadratic term, per capita gross domestic product (GDP) (PGDP), population scale (POP), urbanization (Urban), per capita energy use (EC), and trade openness
We have investigated the relationship between tax burden and carbon emissions using data from a cross-section of OECD countries over the time span from 1991 to 2014
To examine whether the impact of the tax burden on carbon emissions varies across the countries based on their levels of carbon emissions, we have employed a new panel quantile model with fixed effect to investigate the impact of the tax burden on environmental quality
Summary
According to the world bank, the share of tax revenue in GDP of OECD countries was as high as 15.48% in 2015, higher than that of middle-income countries (12.04% in 2015) Taking it as a sample can better evaluate the relationship between tax burden and carbon emission, which has important guiding significance for controlling carbon emission of other countries, especially developing countries. 2) We use a panel quantile model with non-additive fixed effect to evaluate the impact of tax burden on carbon emission in the whole conditional distribution. This model can well describe the tail distribution of carbon emissions, that is, pay special attention to the most and least emission countries.
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