How environmental taxes and carbon emissions are related in the G7 economies?

TLDR

This study investigates how environmental taxes influence carbon emissions in G7 nations (1994‑2014) and examines the moderating role of such taxes on energy consumption, natural resource rents, and CO2 emissions, while testing the Environmental Kuznets Curve hypothesis. The authors analyze G7 data from 1994‑2014, estimating the marginal effects of environmental taxes on traditional energy use, natural resource rents, renewable energy consumption, and CO2 emissions, and test the Environmental Kuznets Curve hypothesis. Environmental taxes significantly reduce G7 carbon emissions, with higher tax rates amplifying effects on energy use, resource rents, and renewable consumption, and the study suggests that reallocating tax revenues to sustainable technology R&D can further advance SDG‑7 and SDG‑13.

Abstract

This paper explores the impact of an environmental tax on carbon emissions for the G7 nations from 1994 to 2014 and the importance of the major drivers of emissions such as energy use, economic complexity, natural resources rent and economic growth. The study also verifies the Environmental Kuznets Curve Hypothesis for the G7 countries and explores the marginal effects of an environmental tax on traditional energy consumption, natural resources rent and renewable energy consumption. This paper's unique contribution is that it investigates for the first time the moderating role of an environmental tax on renewable and non-renewable energy consumption, natural resources rent and CO2 emissions. The results suggest that environmental taxes effectively reduce emissions for the G7 countries and confirm that the marginal effects of the environmental tax on traditional energy consumption, natural resources rent and renewable energy consumption rise with the level of taxation in a statistically significant way. The findings indicate that strict environmental tax laws will allow businesses to shift production towards cleaner methods. Finally, the paper proposes that redistributing tax revenues to the research and development of sustainable technology programmes would empower the nations to achieve the United Nations' SDG-7 and SDG-13 goals.