Investigating the Effects of Environmental Tax Revenues on Economic Development: The Case of Nordic Countries

Abstract

The topic of environmental taxation is becoming increasingly significant, particularly in its role in promoting sustainable development. Environmental tax policy can be used as an active tool for improving environmental quality and economic development. The primary aim of this study is to detect which environmental tax revenues influenced economic development in Nordic countries (Denmark, Finland, Iceland, Norway, and Sweden) for the period 2013–2022. The empirical findings of various panel models confirm that energy tax revenues and transport tax revenues have significant and positive effects on economic development measured by GDP per capita. Additionally, pollution tax revenues have a positive but not significant impact on GDP per capita in these countries. Nordic countries should focus on a greater share of these revenues in their total tax structure, especially pollution tax revenues, to provide desirable implications and effects on economic development in the Nordic region.