Environmental Tax Policy Research Articles

Environmental protection tax policy and corporate risk-taking: Evidence from China

The fight against pollution problems has sparked a myriad of Environmental Protection Tax (EPT) policies by governments across the globe. However, it remains unclear whether and how EPT affects the level of corporate risk-taking. To narrow the gap, this research selects the EPT policy implemented in 2018 as a quasi-natural experiment to test the effect of EPT on the level of corporate risk-taking by using the sample of Chinese listed firms from 2014 to 2022. The result finds that EPT could dampen the level of corporate risk-taking. Mechanism analysis shows that, the increased market attention, elevated financing costs, and raised investment in end-of-pipe pollution control are the mechanisms by which EPT reduces the level of corporate risk-taking. The “market pressure hypothesis” and “resource dependence hypothesis” of corporate risk-taking can help us better understand these three paths. Moreover, the heterogeneity analysis reveals that the disincentive effect is more pronounced in small enterprises, and those with high financing constraints and low institutional investor ownership. Meanwhile, the disincentive effect is also more pronounced for enterprises located in regions with underdeveloped digital financial inclusion and strong law enforcement. Overall, our findings contribute to a more comprehensive understanding of the impact of EPT on corporate risk-taking at the micro level and provide valuable insights for targeted policy enhancements.

Environmental Policies and Tax Incentives in the Pillar Two Era: A Comparison of the EU and US Approaches

This article explores the interaction between global corporate taxes, specifically under the OECD’s Pillar Two, as implemented by the EU Minimum Taxation Directive (2022/2523) in the European Union and by the Corporate Minimum Tax (CAMT) in the United States, and fiscal incentives supporting environmental tax policies under the European Union’s Green Deal and the US Inflation Reduction Act (IRA). The article compares the EU and US approaches and reveals the impact on the investment strategies of MNEs, with a focus on the location of intangibles related to renewable energy technologies, as well as State aid considerations. The article proposes that, instead of marginalizing the green tax credits, they should be reshaped and made subject to a benchmark that supports sustainable innovation within the global tax framework.

How can we accept ‘our’ decisions?: an experimental study on lottocracy, epistocracy, and electoral democracy

Abstract Lottocracy and epistocracy have received deeply insightful attention as political regimes. Herein, by conducting an experiment using an online survey, we explored the extent to which public opinion is receptive to political decisions under various regimes regarding two environmental policies: education policy and environmental tax policy. By doing so, we examined whether the presence of tax burdens affected the acceptability of political regimes, i.e., electoral democracy, lottocracy, and epistocracy. Our results revealed that decisions based on lottocracy and epistocracy were significantly less acceptable than those based on electoral democracy. Nevertheless, lottocratic and epistocratic decisions were more acceptable regarding the issue of environmental tax policy. The difference was mainly attributed to people's rejection of environmental tax policy offsetting their rejection of lottocracy and epistocracy. This suggests, first, that decisions based on electoral democracy increase policies' acceptability if they do not involve taxation, and second, that the status of whether or not a decision is electoral does not significantly affect policy acceptability if taxation is involved, whereas on the other hand, people are sensitive to differences between the regimes if the policy does not involve taxation.

Does environmental protection tax impact corporate ESG greenwashing? A quasi-natural experiment in China

The recently implemented environmental protection tax (EPT) policy in China provides the opportunity to conduct a quasi-natural experiment to empirically evaluate environmental regulations’ impact on corporate practices. We adopt the difference-in-differences method to analyze the effect and mechanisms of the EPT on corporate environmental, social, and governance (ESG) greenwashing based on Chinese A-share listed companies from 2015 to 2021. The empirical results show that the EPT drives companies to engage in ESG greenwashing, significantly increasing ESG greenwashing by approximately 13.16 %. The mechanism tests demonstrate that the EPT exerts governance pressure but does not create more resources, making companies more likely to achieve compliance through greenwashing. Furthermore, the effect of the EPT on ESG greenwashing is more pronounced for large companies and those located in regions with high economic development and strong regulatory enforcement. Our study provides solid evidence with valuable implications for improving the EPT policy to achieve green and sustainable development.

Implementation of industrial symbiosis under environmental tax policy

Industrial symbiosis is an important practice to achieve economic and environmental advantage. This paper explores the implementation of industrial symbiosis under environmental tax policy. Specifically, we use a game-theoretic approach to analyze the interaction between the government and the manufacturers involved in industrial symbiosis in two supply chain structures: integrated structure and decentralized structure. We find that environmental tax is an effective tool to reduce the mismatch between waste supply and demand in the symbiotic supply chain. The government is inclined to set a more stringent environmental tax in the integrated supply chain, while the tax rate that triggers the full conversion of waste in decentralized scenario is larger than that in integrated scenario. The integration of the symbiotic supply chain may promote the utilization of waste and bring a higher social welfare and better environmental performance. The profit of supply chain in the integrated structure is not always higher than that in the decentralized structure. When the market potential of by-product is not large enough and the damage of waste is moderate, it is more profitable to implement industrial symbiosis in a decentralized supply chain.

Can environmental taxes and green technological investment ease environmental pollution in China?

This study examines the complex relationship between environmental taxation, green technology, green investment, real GDP, and environmental pollution by employing the Nonlinear autoregressive distributive lag model for China. The findings indicate that environmental tax policies have significant short- and long-term effects, with positive shocks leading to pollution reductions. The positive and negative shocks to green investment increase pollution levels in the long run. Moreover, the real GDP displays pollution reductions in the short run. The results provide valuable insights into China's environmental and economic situation and offer policy recommendations. These findings were confirmed using the Wald test. The findings emphasize China's need for stronger environmental taxes, green technology adoption, evaluated green investments, and sustainable economic growth to achieve cleaner production and environmental sustainability.

Environmental protection tax and enterprises’ green technology innovation: Evidence from China

The Environmental Protection Tax Law was officially implemented, marking the initial establishment of China's green tax system. This paper aims to estimate whether the introduction of environmental protection tax will promote enterprises' green technology innovation. Based on data from listed enterprises from 2015 to 2021, this paper takes the implementation of environmental protection tax in 2018 as a quasi-natural experiment, and uses the DID method to evaluate the impact of the implementation of environmental protection tax on the technological innovation ability of enterprises. The results show that, after the implementation of environmental protection tax, the quantity of green patents increased significantly, while the quality of green patents decreased significantly. The analysis of mechanism channel reveals that environmental protection tax policy appears to increase the number of green patents putting regulatory pressure on enterprises and increasing R&D investment, while managerial myopia inhibits the improvement of green patent quality. The changes in the quantity and quality of green patents in large enterprises are more significant. It is also found that the quantity in coastal areas decreased significantly, while the quantity in inland areas markedly increased.

Can environmental protection tax alleviate the mismatch of financing and investment maturities of heavily polluting enterprises?

The gradual implementation of environmental protection tax policies has incentivized enterprises to engage in green production, effectively promoting China's accelerated achievement of the “dual‑carbon” goal. Although environmental protection tax has an important impact on the investment and financing decisions of heavily polluting enterprises (HPE), few studies have focused on the relationship between environmental protection tax and mismatch of financing and investment maturities. In this paper, we consider China's environmental protection tax reform as a “quasi-natural experiment”, and utilize the data of A-share listed companies from 2013 to 2022, and use a difference-in-differences (DID) model to assess the impact of this policy on the degree of mismatch of financing and investment maturities of HPE. The study shows that the implementation of the environmental protection tax policy (EPTP) significantly reduces the investment and financing maturities mismatch of the HPE, but this effect “fails” in the high tax rate area, and the policy is difficult to reverse the financing difficulties of the enterprises with a large degree of their own investment and financing maturities mismatch. The mediation mechanism test proves the EPTP acts on the mismatch of financing and investment maturities through two paths: alleviating the financing constraints faced by enterprises and increasing external supervision pressure; the impact of the policy has a time-differentiated effect, which is weakened year by year.

The role of environmental tax in guiding global climate policies to mitigate climate changes in European region

AbstractThe purpose of this study is to perform a practical inquiry into the influence of environmental tax laws on the execution of climate‐related financial policies. Our research will assess the effectiveness of environmental tax measures in 23 European countries from 2011 to 2020. The panel‐corrected standard error (PCSE) model and the feasible generalized least squares (FGLS) model are used in the empirical examination of the link between environmental tax laws and the implementation of climate‐related financial measures. This study is based on panel data with cross‐sectional dependence. The results of our estimation highlight the need to improve policy effectiveness by using all four ecological tax indicators. These include total environmental tax revenue, energy tax revenue, pollution and resource tax revenue, and transportation tax revenue. Furthermore, we provide actual evidence clarifying the process by which the implementation of environmental tax policies improves the efficacy of climate‐related financial policies in the short term as well as the long term. According to the findings, a third of environmental tax policy indicators have a long‐term effect on the implementation of climate‐related financial measures, with no short‐term effects seen. Our findings are critical for economists and policy‐makers who support the environmental tax as an effective tool to promote a country's climate policy implementations.

Promoting Environmental Sustainability: The Role of Renewable Energy Systems and Environmental Taxes

This study examines the effects of renewable energy consumption and environmental taxes on CO2 emissions in OECD countries from 1990 to 2022, employing the cross-sectional autoregressive distributed lag (CS-ARDL) approach. The findings reveal that both renewable energy consumption and environmental taxes significantly reduce CO2 emissions in both the short and the long term, emphasizing their crucial roles in climate change mitigation and sustainability promotion. Furthermore, this study identifies that industrialization and urbanization contribute to increased emissions, whereas foreign direct investment aids in emission reduction through the facilitation of green technology transfer. Economic growth is initially associated with higher emissions, but this trend reverses as economies mature and adopt sustainable practices. These results highlight the importance of continuous investment in renewable energy infrastructure and the implementation of robust environmental tax policies to achieve long-term sustainability goals. The integration of environmental considerations into economic and urban planning, along with leveraging foreign direct investment for technological advancements, is imperative for balancing economic growth with the necessity to reduce carbon emissions and effectively address climate change. This research provides a better understanding of the diverse factors influencing CO2 emissions and offers critical insights for policymakers.

Environmental Protection Tax Reform in China: A Catalyst or a Barrier to Total Factor Productivity? An Analysis through a Quasi-Natural Experiment

China’s 2018 environmental protection tax (EPT) reform was introduced in response to increasing concerns about environmental degradation. It aimed to use fiscal policy to enhance environmental governance while fostering economic productivity. This study employs a difference-in-differences approach to analyze panel data from publicly listed companies between 2009 and 2019. It examines the reform’s influence on total factor productivity (TFP) in pollution-intensive industries, addressing both environmental and economic objectives. The results reveal that the tax reform significantly enhances TFP, acting as a robust catalyst for economic growth rather than a barrier. This effect is particularly strong in state-owned enterprises and those with less-severe financing constraints. Mechanism analysis indicates that the reform boosts TFP through the promotion of green innovations and alleviation of financing constraints. These findings provide empirical evidence at the micro-level of the reform’s efficacy in promoting sustainable business practices. The study offers insights for future environmental tax policies in China and underscores the necessity of aligning environmental and economic strategies to achieve sustainable development.

Mapping the Landscape of Environmental Taxation Studies with a Bibliometric Approach

This study presents a comprehensive bibliometric analysis of environmental taxation research, aiming to map the thematic landscape, identify research trends, and highlight potential areas for future investigation. Utilizing VOSviewer, the analysis encompasses 980 papers published between 1983 and 2024, revealing key themes such as economic impacts, sustainable development, emission control, and policy optimization. Temporal trends indicate a growing emphasis on integrating innovation and sustainability into environmental tax policies. Potential research areas identified include optimizing tax rates, exploring behavioral responses, and addressing equity considerations. The co-authorship network analysis highlights influential authors and collaborative clusters, suggesting opportunities for enhancing interdisciplinary research. This study provides valuable insights for policymakers, academics, and practitioners aiming to design effective environmental tax policies that address global environmental challenges.

Research on the Effects of Environmental Policies on Enterprise Transformation and Green Taxation: A Case Study of Local Governments in 31 Provinces of China

China's economic development is at a unique stage of new-type transformation, with increasing demands for the quality of economic development. Environmental fiscal and tax policies are widely recognized as crucial tools for promoting enterprise transformation and green taxation. The 20th National Congress of the Communist Party of China proposed to "improve the fiscal, financial, investment, price policies, and standards that support green development." Fiscal policy is the foundation and important pillar of national governance, and the fiscal and tax system is a critical support and basic means to promote green and low-carbon development. This paper analyzes cross-sectional data from 31 provinces, autonomous regions, and municipalities in China for the year 2022. By constructing and testing an OLS regression model, the study uses the environmental tax as a representative of the tax regulation for green development of enterprises, analyzing its influencing factors and effects. The paper provides relevant suggestions for enterprise green transformation and tax avoidance based on literature review and model results.

Evolving waste management: The impact of environmental technology, taxes, and carbon emissions on incineration in EU countries

Amid the urgent global imperatives concerning climate change and resource preservation, our research delves into the critical domains of waste management and environmental sustainability within the European Union (EU), collecting data from 1990 to 2022. The Method of Moments Quantile Regression (MMQR) results reveal a resounding commitment among EU member states to diminish their reliance on incineration, which is evident through adopting green technologies and environmentally conscious taxation policies, aligning with the European Union's sustainability objectives. However, this transition presents the intricate task of harmonizing industrial emissions management with efficient waste disposal. Tailoring waste management strategies to accommodate diverse consumption patterns and unique circumstances within individual member states becomes imperative. Cointegrating regressions highlighted the long-run relationship among the selected variables, while Feasible Generalized Least Squares (FGLS) and Panel-Corrected Standard Errors (PCSE) estimates roughly confirmed MMQR results. ML analyses, conducted through two ensemble methods (Gradient Boosting, GB, and Extreme Gradient Boosting, XGBoost) shed light on the relative importance of the predictors: in particular, environmental taxation, consumption-based emissions, and production-based emissions greatly contribute to determining the variation of combustible renewables and waste. This study recommends that EU countries establish monitoring mechanisms to advance waste management and environmental sustainability through green technology adoption, enhance environmental taxation policies, and accelerate the renewable energy transition.

Can machine learning predict environmental attitudes and beliefs?

ABSTRACT Beliefs and attitudes regarding climate change significantly influence public support for environmental policy regulations and willingness to engage in voluntary actions. This paper endeavours to forecast public perceptions concerning global warming, anthropogenic climate change, support for environmental tax policies, and the inclination to purchase energy-efficient home appliances. Leveraging data from the European Social Survey, we employ four machine learning techniques to anticipate individuals’ environmental beliefs and attitudes. Across various settings, our analysis achieves an accuracy of over 70% in identifying environmentally conscious respondents.

Forest Protection Tax Policy in the Context of Portuguese Societies

This article aims to study the fiscal incentives for forest protection in Portugal. Understanding the reality of this fiscal policy is fundamental in the context of sustainable forest management. After reviewing the literature focused on the importance of the forest as an essential asset to meet human needs, the Portuguese tax regime in this area is analysed. This is followed by a study of tax incentives for Forest Intervention Areas (FIA) and Forest Management Plans (FMP) in the Portuguese business context in the period 2015-2020. The main results of the research show that companies connected to the sector have become more aware of the importance of adopting more sustainable practices, by adhering to these tax benefits over time, showing the role of environmental tax policy in the sustainable growth of the economic tissue. The results show that the number of beneficiary companies is reduced compared to the total number of companies operating in the forestry sector in Portugal, also verifying that most of these companies are concentrated in a small number of municipalities, some of which have no ZIF. Ther is still important work to be done with a view to greater dissemination of the tax benefits under study.

The role of ICT investment, digital financial inclusion, and environmental tax in promoting sustainable energy development in the MENA region: Evidences with Dynamic Common Correlated Effects (DCE) and instrumental variable-adjusted DCE.

His research investigates the interplay among investment in Information and Communication Technology [ICT], digital financial inclusion, environmental tax policies, and their impact on the progression of sustainable energy development within the Middle East and North Africa [MENA] region. Recognizing the distinctive hurdles impeding sustainable energy advancement, effective policy formulation and implementation in MENA necessitate a comprehensive understanding of these variables. Employing a Dynamic Common Correlated Effects [DCE] model alongside an instrumental variable-adjusted DCE approach, this study explores the relationship between ICT investment, digital financial inclusion, environmental tax, and sustainable energy development. The DCE model facilitates the analysis of dynamic effects and potential correlations, while the instrumental variable-adjusted DCE model addresses issues pertaining to endogeneity. The results indicate that both ICT investment and the promotion of digital financial inclusion significantly and positively impact sustainable energy development in the MENA region. Additionally, the study underscores the importance of environmental tax implementation in fostering sustainable energy advancement, highlighting the critical role of environmental policy interventions. Based on these findings, governmental prioritization of ICT investment and initiatives for digital financial service integration is recommended to bolster sustainable energy growth in MENA. Furthermore, the adoption of efficient environmental tax measures is essential to incentivize sustainable energy practices and mitigate environmental degradation. These policy recommendations aim to create a conducive environment for sustainable energy progression in the MENA region, contributing to both economic prosperity and environmental conservation.

Environmental taxes, technological innovation and firm performance: Evidence from China's manufacturing firms

Based on panel data from 2011 to 2019 for heavily polluting listed firms in the manufacturing industry, this paper examines the impact of environmental taxes on technological innovation and firm performance using the propensity score matching (PSM) and differences-in-differences (DID) methods. The empirical results show the following: (i) Firm performance and innovation quantity are positively affected by environmental taxes. The average effects of environmental taxes on firm performance and innovation quantity are 1.28 and 0.219, respectively. However, environmental taxes have no significant impact on innovation quality. (ii) A mechanism analysis reveals that innovation quantity plays a significant partial mediating role in the positive effect of environmental taxes on firm performance. (iii) Heterogeneity analysis shows that different environmental tax rates lead to a variation in innovation quantity and firm performance across regions. The positive effect of environmental taxes on innovation quantity is only confirmed in high-tax and low-tax areas. Meanwhile, high environmental taxes are related to better firm performance. Based on the research, policy recommendations are put forward to optimise environmental taxes, such as improving the environmental tax system and coordinating environmental tax and innovation policies.

Digital Technologies, Environmental Governance and Environmental Performance: Empirical Evidence from China

This research conducts an empirical analysis of the relationship between digital technologies, environmental governance (assessed through environmental taxes), and China's environmental performance from 1995 to 2020. Additionally, within the framework of the STIRPAT model, the impacts of GDP and urbanization on ecological footprints are examined. This study is distinguished by its innovative approach to evaluating environmental performance via ecological footprints and the application of the Autoregressive Distributed Lag (ARDL) model along with Dynamic Ordinary Least Squares (DOLS), Canonical Cointegration Regression (CCR), and Fully Modified Ordinary Least Squares (FMOLS) as long-run estimators, methodologies not previously applied to this context in China. The findings indicate that digital technologies and environmental taxes contribute to a reduction in ecological footprints, while GDP and urbanization have an adverse effect, increasing ecological footprints. Post-estimation diagnostics confirm the absence of serial correlation and heteroskedasticity, and affirm the normal distribution of the disturbance terms. For a robustness check, the study further employs DOLS, FMOLS, and CCR methods, which corroborate the initial results regarding the beneficial impact of digital technologies and environmental governance on ecological footprints. Based on these findings, the study advises the Chinese government and policymakers to enact more effective environmental tax policies and leverage digital technologies to enhance environmental sustainability in China.

Green Fiscal and Tax Policies in China: An Environmental Dynamic Stochastic General Equilibrium Approach

Implementing green fiscal and tax policies for reducing emissions and pollution without negatively impacting economic growth remains a challenge. We aimed to determine whether environmental protection and economic growth can both be attained under a green fiscal and tax policy. Specifically, we created a dynamic stochastic general equilibrium (DSGE) model to explore the environmental, economic, and welfare impacts of green fiscal and tax policies. Additionally, a welfare analysis based on an environmental DSGE (E-DSGE) model was performed. We found that (1) raising the environmental or energy tax rate was beneficial for reducing emissions and environmental pollution. However, this approach inhibited economic growth, an outcome not conducive to improving welfare. (2) Increasing the subsidy rate for emission reduction not only incentivized businesses to reduce emissions but also improved economic growth and welfare. (3) The emission reduction mechanisms of environmental tax policies, energy tax policies, and subsidy policies are different. Among them, the environmental tax policy and the energy tax policy both reduce pollution by forcing businesses to increase their emission reduction efforts, but the former is a tax on pollution emissions, while the latter is a tax on energy consumption. However, emission reduction subsidy policies incentivize companies to increase their emission reduction efforts and reduce pollution emissions by alleviating their financial burden. (4) Increasing government spending on environmental remediation could promote economic growth. However, considering that this does not motivate companies to reduce emissions, increasing their share will lead to a reduction in emission reduction subsidies, ultimately negatively impacting social welfare. (5) An environmental tax would cause greater losses in welfare than an energy tax. These findings will enable policymakers to optimize expenditures and tax systems.