Economic impact of the carbon tax: Evaluation of the reduction in CO2 emissions

Abstract

AbstractThe use of environmental protection policies has developed considerably over the last two decades and has generated a prolific literature. This study examines the impact of environmental policies on environmental quality for a panel of 36 OECD countries over the period from 1994 to 2018. To do this, we use matching and double‐difference methods. This enabled us to find a causal link between the environmental tax and CO2 emissions in the manufacturing and transport sectors. Furthermore, by estimating our model using fixed effects techniques, Driscoll and Kraay, Lewbel 2SLS and Quantiles, we obtained the result demonstrating that the environmental tax contributes to reducing CO2 emissions from the transport and manufacturing sectors. On the basis of these results, we suggest that taxes should be strengthened quantitatively and qualitatively in order to better target sectors known to be highly polluting.