Evaluating the Double Dividend of Environmental Tax Reform (Case Study: EU Countries)
Author
Ph.D. Candidate in Development Economics, Faculty of Economics, Allameh Tabataba’i University, Tehran, Iran
Abstract
One of the basic tools for achieving sustainable development is the imposition of green taxes on polluting activities. In this regard, international institutions have proposed Environmental Tax Reform. Accordingly, if countries replace destruction taxes with green taxes, parallel with financing, the environmental sustainability is also ensured. Based on this hypothesis, the green tax provides two types of benefits: improving environmental quality, and economic efficiency. The purpose of this study is to test the validity of creating a double dividend after carrying out environmental tax reforms in countries. The method used in this study is descriptive-inferential. In order to test the double dividend hypothesis, two multivariate linear regressions were used. The first model tests the effect of green taxes and income taxes on final energy consumption. The second model considers the effect of the interaction of these two taxes. To estimate both models, panel data from EU member states for the period 2018-1995 were used. To estimate the models, data related to the European Union’s members for the time interval 1995-2018 were employed. The finding of this study showed that with 1% increase in green tax revenue, final energy consumption in the selected countries decreased by 0.12%, and the first dividend was confirmed. However, the estimation of the second model did not confirm the second dividend that claimed green taxes can be a replacement for environmental destruction taxes.
Keywords
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http://www.oecd.org/env/tools-evaluation/environmental-taxes.htm
