Environmental Tax Reform Research Articles

The Impact of Environmental Protection Tax Reform on Corporate Performance: An Empirical Analysis in China

The Impact of Environmental Protection Tax Reform on Corporate Performance: An Empirical Analysis in China

Trying to find a balance: Energy excise duties in the context of climate targets, energy shocks, and redistributive goals

This study examines the implementation of an environmental tax reform in Italy, focusing on changes in excise duties on petrol, diesel and electricity. The reform is in line with the revised European Energy Tax Directive and aims to support European climate objectives. The main motivation of this research is to show how the additional revenues generated by the environmental reform can be used to mitigate its regressive impact on low-income households through cash transfers. The analysis uses a microsimulation model based on data from the Household Budget Survey. The environmental reform combined with the cash transfer is implemented for 2019 and 2022, this latter being a year significantly affected by the energy crisis. The results confirm the inherent regressivity of the environmental tax reform when considered in isolation, but they also reveal significant positive redistributive effects achieved by paying monetary transfers to households in the lowest three income deciles. In this case, the reform enhances redistributive outcomes that remain effective even when the structure of the transfers is modified. The paper also highlights the limited redistributive impact of the 2022 excise tax cuts on fuel, which aimed to address the regressive effects of the energy shock. Again, a targeted cash transfer would have been more effective for low-income households.

Environmental protection tax reform and corporate Climate Risk Disclosure

The reform of the environmental protection tax (EPT), a crucial policy instrument for combating climate change, significantly influences corporate climate risk. Hence, a thorough examination of the connection between EPT and corporate climate risk disclosure (CRD) is essential for companies to better evaluate the risks and challenges they encounter. The findings of the research indicate: (1) EPT reform substantially boosts corporate CRD. (2) Mechanism tests demonstrate that EPT enhances corporate CRD via three pathways: increasing public environmental awareness, fostering green innovation, and improving total factor productivity. (3) Heterogeneity analysis shows that various factors such as micro-level corporate characteristics (ownership and corporate life cycle), industry features (high-tech industries and factor intensity), and macro-level aspects (urban location, size, and resource attributes) differentially affect the impact of EPT. (4) Additional analysis from the perspective of institutional investors indicates that a higher proportion of institutional investor holdings amplifies the positive effect of EPT on corporate CRD. These research conclusions aid in accurately assessing the CRD impact of EPT and provide empirical support for policy development and modification.

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.

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.

Designing China's environmental tax schemes from the perspective of differential tax rates

The Environmental Protection Tax Law of the People's Republic of China was promulgated in 2018. However, it is uncertain whether the tax rates defined under the law are reasonable. Environmental tax reform would help the government improve the law's emission reduction effect. This paper aims to design tax schemes from the perspective of differential tax rates and propose environmental tax reform strategies. To support this goal, we adopted a directional distance function, meta-frontier analysis, and an exponential attenuation model to construct a differential tax rate model. Next, starting with the current differential provincial tax rates (scheme B), we proposed three-level differential tax rates, in which the adjusted provincial tax rates (scheme P), differential sector tax rates (scheme S), and differential province–sector tax rates (scheme P–S). Then, we analyzed three new tax schemes and proposed two step-by-step reform strategies. We selected SO2, NOx, and CO2 for empirical analysis. We found that in the short term, the government should prioritize scheme P and set more effective tax rates for SO2 and NOx. In the long term, the government should implement scheme P–S to consider both regional heterogeneity and industrial heterogeneity within a province. Specific measures should set a high tax rate for the light industry category and a low tax rate for energy production and heavy industry category. In addition, we propose that China should include a carbon tax in the scope of its environmental taxes. Our research provides valuable guidance for China's future environmental tax reform.

National Environmental Taxes and Industrial Waste in Countries across Europe

The use of economic instruments within environmental policy has become a challenging topic for policymakers, governments and scholars. Environmental taxes have emerged as a prevailing preference in developed countries to promote sustainability. Recently, a particular focus has been given to waste generation and disposal, shifting the attention from greenhouse gases to another important source of environmental pollution. This paper investigates the effect of national environmental taxes and policies on industrial waste. A fixed effects model is used for 34 countries across Europe from 2004 to 2022. The results suggest that environmental taxes and energy policies reduce industrial (hazardous and non-hazardous) waste. However, environmental tax reforms should take into consideration the deterioration in environmental quality, the increase in economic costs and undesirable social consequences.

Research on the Impact of Environmental Protection Tax on Green Technology Innovation of Enterprises

Research on the Impact of Environmental Protection Tax on Green Technology Innovation of Enterprises

China's environmental tax reform achieves the co-management of carbon and haze: The role of optimizing energy utilization

Environmental tax reform in China is an essential initiative to achieve carbon and haze co-management by shifting the Environmental Fee to Tax (EFT). Therefore, we employ a Coupling Coordination Degree (CCD) model to measure the level of carbon and haze co-management across three distinct scenarios in China. Treating the EFT policy as a quasi-natural experiment, the study explores its impact on carbon and haze co-management using data of 282 prefecture-level cities in China during 2015–2020. Furthermore, the study further analyzes the regional heterogeneity and the transmission mechanisms of optimizing energy utilization. The principal findings of this investigation are as follows. First, the co-management levels of carbon and haze in China show a discernible upward trend from 2015 to 2020. A heightened emphasis on carbon reduction is helpful in improving the co-management level of carbon and haze. Co-management levels of carbon and haze are lower within the treatment group compared to the control group, but their growth rates are higher. Second, the EFT policy in China has significantly enhanced the co-management level of carbon and haze. Third, the impact of China's EFT policy has a more pronounced effect in western China and a comparatively weaker effect in middle China, which may be attributed to variations in industrial infrastructure, supporting facilities, availability of clean energy resources, and prevailing policy inclinations across different regions of China. Finally, China's EFT policy is an instrumental factor in augmenting the co-management level of carbon and haze, primarily through pathways of upgrading energy structure and improving energy efficiency.

Has environmental protection tax reform promoted green transformation of enterprises? Evidence from China.

Facing the increasingly stringent constraints of resources and the environment, the green transformation of enterprises is imperative. This study selects A-share listed companies in Shanghai and Shenzhen from 2014 to 2021 as samples, using the difference-in-differences method to examine the impact of the environmental protection tax reform (EPTR) on the green transformation of enterprises. The results indicate that the EPTR can promote the green transformation of enterprises, achieving this through three channels: raising the cost of pollution, strengthening the rigidity of law enforcement, and breaking the collusion between the government and enterprises. Notably, this promotional effect is more significant in non-state-owned enterprises, companies in the eastern and western regions, firms with low financing constraints, and those with high media attention. Further analysis shows that the EPTR has a positive impact on the green total factor productivity (GTFP) of enterprises, which implies that enterprises are not only proactively pushing for a green transformation at the strategic level but also taking practical actions. This study responds to the problem of the greening of tax system to promote the green development of enterprises from two aspects of enterprise strategic implementation and productivity and explores the impact mechanism from the perspective of institutional logic. It enriches the research on the effectiveness of the EPTR at the micro-level and broadens the research perspective on the impact mechanisms of environmental regulation. The findings of this study provide references for further optimising relevant policies and regulations and also offer insights for other countries and regions seeking sustainable development.

Impact Study of Environmental Tax Reform Policy on Corporate ESG Performance

The concept of sustainable development is an important issue concerning the national economy and people's livelihood. With the prosperity and development of the economy and society, human beings are increasingly aware of the importance of the ecological environment. This article takes the listed companies on the Shanghai and Shenzhen stock exchanges from 2011 to 2021 as the research sample, using the double difference method to explore the impact of environmental protection tax reform on corporate ESG performance and its mechanism. The study found that the implementation of the “Environmental Protection Tax Law” has a restraining effect on corporate ESG performance. Mechanism analysis reveals that green technology innovation, social welfare expenditures, and the proportion of overseas background executives play an intermediary role in the impact of environmental protection tax reform on corporate ESG performance, with the indirect effect of green technology innovation being the largest. This article provides a new research perspective on the impact of environmental protection tax reform on corporate ESG performance and offers empirical insights for improving environmental tax policies and enhancing corporate ESG performance.

Firm’s Divergent Green Innovation Response to Environmental Tax Reform: the Moderating Role of Corporation Social Responsibility

Firm’s Divergent Green Innovation Response to Environmental Tax Reform: the Moderating Role of Corporation Social Responsibility

Environmental Tax Reform, Risk-taking and Green Development of Enterprises

Environmental Tax Reform, Risk-taking and Green Development of Enterprises

A study on the "Porter Hypothesis" effect of the regulatory measures of the environmental protection tax law in the post-pandemic era.

The implementation of the Environmental Protection Tax Law was a significant milestone in China's environmental tax reform. The implementation of this law was influenced throughout the three-year period of epidemic prevention and control (from early 2020 to the end of 2022). Heavily polluting enterprises are the primary focus of regulations under the Environmental Protection Tax Law. This study conducts an empirical analysis using a structural equation model, leveraging sample data obtained from heavily polluting enterprises in China. The findings indicate that during the three-year period of epidemic prevention and control, the Porter Hypothesis effect was realized in terms of tax fairness but not in terms of tax rationality. Therefore, environmental tax law reforms should be pursued and tax authorities in China should make vigorous efforts to enhance the rationality of environmental taxation. This would improve the comprehensiveness of the "Porter Hypothesis" effect, fully harnessing the dual functions of environmental protection and the economic driving force embodied by the Environmental Protection Tax Law.

The impact of environmental protection tax reform on low-carbon total factor productivity: Evidence from China's fee-to-tax reform

The low-carbon transformation is the key to China's high-quality economic development. This paper uses the panel data of 278 Chinese cities to measure low-carbon total factor productivity (LCTFP) and examines the impact of environmental protection tax (EPT) reform on LCTFP. EPT significantly promotes LCTFP. The promotion effect is more significant in the lower administrative level and resource-based cities in central and western regions. EPT promotes LCTFP through three channels including green technology innovation (GTI) effect, industrial structure upgrading effect and forcing effect. EPT has a negative spatial spillover effect on LCTFP in neighboring areas. This paper provides important empirical evidence for further advancing the EPT in China.

Fiscal Effects of Environmental Tax Reform: A Comparative Analysis of China, Germany and the United Kingdom

Fiscal Effects of Environmental Tax Reform: A Comparative Analysis of China, Germany and the United Kingdom

Strategies for sustainable economic growth: The role of green taxation and renewable energy investment in the U.S

This review paper delves into the critical role of green taxation policies and renewable energy investments in fostering sustainable economic growth in the United States. It scrutinizes the effectiveness of current tax incentives and policies in propelling investments in renewable energy, evaluating their contributions to environmental conservation and sustainable development. The study is anchored on a comprehensive literature review approach, focusing on selecting relevant studies and reports that shed light on the integration of technology in social work, particularly in the African context and its implications for U.S. practice. The findings reveal that while green taxation and renewable energy investments offer significant benefits in terms of reducing pollution and promoting sustainable energy sources, their environmental impacts must be carefully managed. The paper also explores the interplay between green taxation and public health policy, assessing how environmental tax reforms can contribute to a healthier U.S. population. In conclusion, the study provides policy recommendations for enhancing the U.S. position as a leader in environmental stewardship and sustainable economic practices. It underscores the need for a multifaceted approach that includes fiscal incentives, supportive regulatory frameworks, strategic financing mechanisms, and public-private collaboration. Future research should focus on addressing the identified gaps, particularly in exploring innovative financing mechanisms and assessing the long-term impacts of these policies on economic growth and environmental sustainability.

Environmental Tax Reform and the European Green Deal: Empirical Evidence from Panel Data Analysis

The European Green Deal, the European Union's roadmap for a green transition, was launched in 2019. With this strategy, the European Union aims to stop carbon emissions by 2050 through green policies in many sectors, especially in the energy sector. The European Union also uses various environmental tax instruments to achieve this goal. Environmental taxes, one of these instruments, are considered to have a regressive effect on employment and welfare, especially in carbon-intensive industries. In order to mitigate these negative social and economic impacts of the green transition, the European Union has implemented the Just Transition Mechanism. However, it is not known whether the Just Transition Mechanism will be sufficient after the newly introduced regulations such as the plastic tax, the Energy Tax Directive, and the Carbon Border Adjustment. This study conducted a panel data analysis covering the period between 1994-2020 to analyze the impact of environmental taxes on employment. In this panel of 29 European countries, the dependent variable is the unemployment rate while independent variables are environmental taxes, gross domestic product, renewable energy supply and energy efficiency. As a result of this analysis, it is concluded that environmental taxes have an increasing effect on unemployment. Therefore, based on the panel data analysis, it is concluded that the Environmental Tax Reform package, which will provide double dividend in terms of both environmental and employment, should be implemented in addition to the Just Transition Mechanism.

Deregulation of short-selling and green innovation of enterprises: quasi-natural experiment of margin trading policy

PurposeThe reform and opening-up of capital market is valued for promoting sustainable development, while its impact presented as the form of deregulation of short-selling on the green innovation of enterprises in developing countries remains unclear. The purpose of this study is to outline the significance of gradual reform of financial markets in developing countries for low-carbon transformation and provide implications for achieving carbon peaking and carbon neutrality goals.Design/methodology/approachBased on the green subdivided patent data and financial data of China’s A-share listed companies, this paper takes the implementation of securities margin trading program as a quasi-natural experiment and applies the difference-in-differences (DID) model to examine the impact of deregulation of short-selling constraints on the enterprises’ green transformation.FindingsThe findings reveal that the initiating securities margin trading program significantly enhances the green innovation performance of enterprises. These findings are valid after performing a series of robustness tests such as the parallel trend test, the placebo test and the methods to exclude other policy interference. Mechanism analyses demonstrate a two-faceted effect of the securities margin trading program on the green innovation of enterprises, in which short-selling policy increases the pressure on capital market deregulation and meanwhile induces the environmental protection investment. The heterogeneity results demonstrate that the impulsive effect imposed by securities margin trading program is more significant in experimental group samples with characteristics of lower financing constraints, belonging to heavy polluting industries and possessing better environmental supervision capability.Originality/valueFirst, previous studies have focused on the impact of financial policies implemented by banking institutions on the green innovation of enterprises, but few literatures have explored the validity of relaxing short-selling restrictions or opening the capital market in the field of enterprise’s green transformation in developing country. From the view of securities market reform, this paper broadens the incentive and supervision effects of the relaxation of short-selling control on enterprise’s green innovation performance after the implementation of securities financing and securities lending policy in China’s capital market. Second, previous studies have explored the impact of command-and-control environmental regulations, as well as market-incentivized environmental regulations such as green finance, low-carbon pilots and environmental tax reform, on the green transition of enterprises. Recently the role of the securities market in the green development of enterprises has received more attention in academia. The pilot of margin financing and securities lending is essentially a market-incentivized regulatory tool, but there is few in-depth research on how it affects the green innovation of enterprises. This paper enriches the research on whether the market incentive financial regulation policy can contribute to the green transformation of enterprises under the Porter hypothesis. Third, some previous studies used the ordinary panel regression model to explore the impact of financial policy on enterprise’s innovation performance. However, due to the potential endogenous problems of the estimated model, it might get biased conclusions. Therefore, based on the method of quasi-natural experiment, this paper selects the margin trading pilot policy as an exogenous shock to solve the endogenous or reverse causality problem in traditional measurement model and applies the DID model to study the relationship between core indicator variables.

The impact of environmental protection tax reform on total factor energy efficiency

The impact of environmental protection tax reform on total factor energy efficiency