Environmental Taxes and Sustainable Development in the EU: A Decade of Data-Driven Insights

This study investigates the dynamic relationship between environmental tax revenue and economic development in the European Union from 2013 to 2022. The findings reveal that these taxes significantly contribute to economic development in the long run, although short-run effects vary by tax type and country. The PMG model results indicate that energy tax revenues increase GDP per capita by 0.038, transport tax revenues by 0.041, and resource tax revenues by 0.018, all of which are statistically significant. Pollution tax revenues have an effect of 0.002 in the long run but are not statistically significant. In the short run, none of the tax variables show significant effects, although pollution tax revenues have a transitional impact of 0.196. The error correction term of −1.321 confirms a strong long-run adjustment, reinforcing the gradual economic benefits of environmental taxation. The results underscore the importance of resource and pollution taxes, which exhibit robust positive impacts, particularly in resource-rich and pollution-intensive economies. Energy and transport taxes also influence economic performance; however, their effectiveness depends on the structural and sectoral differences among countries. This study provides valuable insights for policymakers by highlighting the necessity of designing tailored environmental taxation policies that align with national conditions and long-term sustainability goals. Additionally, this study adopts a systems thinking perspective to capture the interconnectedness between environmental fiscal instruments and macroeconomic sustainability, offering a holistic interpretation of policy impacts.

Abstract licence: CC BY

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