The Impact of Environmental Taxes on Pollution Reduction in Developed Countries

Environmental pollution is an important problem facing many countries and the environmental protection policies are amongst the top priorities of most decision-making processes and policy makings. A most effective measure to improve the quality of the environment is to impose environmental taxes. The purpose of this paper is to investigate the impact of environmental taxes on GHG reduction. To achieve this objective, the data from selected developed countries on the greenhouse gases emissions, especially carbon dioxide emissions together with other variables such as GDP, energy consumption and the added value of the industrial sector during the years 1995-2012 have been used. Pedroni and Kao convergence test and the ordinary least squares method are used to derive cointegration vectors. The results show that in the selected countries, the impact of increasing environmental tax revenues and the added value of industrial sector on emissions are negative and as well as being significant in these countries and the impact of increasing GDP and energy consumption on emissions is also positive and significant. The validity of Kuznets environmental curve is confirmed for these countries.