Abstract
This chapter aims to analyze the environmental tax's contribution to reducing carbon dioxide emissions in Portugal and Spain. Moreover, this study analyses the impact of the use of renewable energies and the gross domestic product (GDP) on carbon dioxide emissions. The data are collected from the Organization for Economic Cooperation and Development (OECD) and Word Bank indicators from 1990 to 2019. The methodology is the time series (two- stage least squares; fully modified OLS; DOLS- dynamic OLS canonical cointegration regression, and granger causality). The unit-roots test demonstrates that the variables used in this investigation are integrated with the first differences. The results demonstrate the importance of the environmental tax and the use of renewable energies in reducing carbon dioxide emissions, both in Portugal and Spain. The results also show the positive effect of economic growth on Spain's increase in carbon dioxide emissions.
TopIntroduction
This chapter aims to analyse the contribution of Environmental Taxes to reducing carbon dioxide emissions in Portugal and Spain. In addition, this study analyses the impact of the use of renewable energies and the Gross Domestic Product (GDP) on carbon dioxide emissions.
The increased global importance of reducing carbon dioxide (CO2) emissions, reinforced by the 2030 Agenda for Sustainable Development of the Organization for Economic Cooperation and Development (OECD), could influence a country's climate policies (Engberg-Pedersen & Zwart, 2018). The Sustainable Development Goals adopted by the United Nations reinforce the importance of working together for a better world (United Nations, 2023).
Usually, the global objectives for climate policies are environmental effectiveness, economic efficiency, and equity (Vona, 2021). In this context, climate policies must consider environmental fiscal policies.
According to empirical studies, two types of environmental fiscal policies can be assumed. The penalizing policies, in which the tax penalizes what negatively affects the environment. Furthermore, the policies promote what benefits the environment through benefits and incentives (Bontems & Bourgeon, 2005; Qi et al., 2023; Shafi; et al., 2023; Wolde-Rufael & Mulat-Weldemeskel, 2021; Yu et al., 2019). This chapter will be focus in the first type, tax penalization.
Several countries have implemented environmental taxes to promote sustainable attitudes, mechanisms, and systems. This implementation of green taxes was carried out fundamentally through the so-called ecological tax reforms. In 2014, the green tax reform in Portugal encouraged and boosted concerns about environmental issues. Some studies investigated the impact of this reform (Borrego, 2016; Pereira et al., 2016; Pereira & Pereira, 2023; Rodríguez et al., 2019; Sousa, 2021). In Spain, environmental concerns and the corresponding reforms have also increased over time (Böhringer et al., 2019; Labandeira et al., 2019). These environmental tax reforms are carried out to obtain a triple dividend. The first dividend is the reduction of carbon dioxide emissions. The second dividend is the gross domestic product (GDP) increase. Moreover, the third dividend is the highest employment (Maxim, 2020). Therefore, the authors consider it essential to analyze whether green taxation impacts environmental indicators (the first dividend). Research on this topic has increased recently (e.g., Bashir et al., 2021). Some studies relate environmental taxation to carbon dioxide emissions in just one country (Sarigül & Topcu, 2021). Other regional studies, such as the OECD or European Countries or comparisons to different countries (Depren et al., 2023; Ghazouani et al., 2020; He et al., 2019; Rafique et al., 2022).
The study of the impacts of environmental taxes on environmental issues gained importance in academic terms with the Kyoto Protocol. From the various empirical studies in the literature, econometric models apply both to time series (Esen & Dündar, 2021; Sarigül & Topcu, 2021; Sun et al., 2020; Ulucak et al., 2020) and panel data (Bashir et al., 2021; Rafique et al., 2022).
Key Terms in this Chapter
Climate Change: Associated with practices that do not respect sustainability principles. As a rule, measures are based on negative environmental and biodiversity impacts but are often understood as global warming.
GDP: Gross domestic product, being a measure that is used to measure economic growth. According to macroeconomics manuals, this measure is part of national accounting and can be determined from the production, expenditure, and income perspective.
Renewable Energy: This type of energy is associated with sustainability issues. As a rule, EU community directives usually list five types: solar, biomass, hydrogen, wind, and oceans.
Carbon Dioxide Emissions: This polluting effect is responsible for gases that stimulate greenhouse effects. Community directives (EU) and the various international conferences on the environment and quality of life seek to promote reducing greenhouse effects.
Economic Growth: The increase of the economic goods and services that a society produces and consumes in one period compared with a previous period.
GDP per Capita: According to macroeconomic theories, this measure allows for assessing the income distribution of a given country or economy. In a way, it provides for determining the country's degree of development since there are other ways to measure the degree of development of an economy.
Environmental Taxes: Include taxes on energy, transport, pollution, and resources.