Do Environmental Taxes Improve Environmental Quality? Evidence from OECD Countries

Abstract

This article investigates the relationship between environmentally related taxes introduced in OECD countries and air pollution, represented by carbon dioxide and greenhouse gas emission levels in the atmosphere. The article makes a statistical analysis of data on environmental taxes, specifically energy and transport taxes, and other variables that might affect air quality in the OECD member countries. The ARDL model used on the panel data of all OECD member countries shows statistical significance in only one out of five models. A subsequent comparative analysis of the reduced sample of OECD countries that are members of the EU exhibits a statistically significant effect of environmentally related tax revenues on the air emission levels, indicating that this relationship is present in the reduced sample.