How do environmental taxes influence the effect of tourism on environmental performance? Evidence from EU countries

Abstract

Evidence of the accumulation of carbon dioxide (CO2) and other greenhouse gases (GHGs) over the years is placing greater emphasis on the use of taxes to achieve a sustainable environment. This study evaluates the effectiveness of environmental taxes in mitigating the effect of tourism on environmental performance in EU-28 countries for the period 2002–2019. The empirical results of the panel threshold regression model suggest that the effect of tourism on environmental performance is dependent on the level of environmental taxes. Particularly, the effect of tourism on environmental performance is insignificant when environmental taxes are below the threshold level of 9.43%. However, once environmental taxes cross a threshold level, tourism would improve environmental performance. This suggests a significant difference in the way tourism influences environmental performance during periods of lower and higher environmental taxes. These findings, therefore, provide insights to policymakers and other stakeholders on the use of environmental taxes as an instrument to avert environmental degradation, and thus mitigate global warming and other significant climate changes.