What is Environmental Taxes

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.