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Environmental Taxes and Carbon Footprint: A Panel Causality Analysis of Selected EU Countries
Abstract
This study examines the causal relationship between environmental taxes and carbon footprint in the context of climate change mitigation, using data from ten major EU economies (Austria, Belgium, France, Germany, Ireland, Italy, Netherlands, Poland, Spain, Sweden) over 1994–2022. Employing panel causality analysis, the study first applies tests for cross-sectional dependence, slope heterogeneity, and panel unit roots. The Dumitrescu and Hurlin test results indicate a significant causality from environmental taxes to per capita carbon emissions in at least one country. The findings suggest that well-designed environmental taxes can play a critical role in reducing emissions. The study highlights the importance of revenue allocation and policy coherence and recommends future research on the effect of such taxes on ecological footprint components for more comprehensive sustainability assessment.
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