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Environmental taxes and environmental quality in Canada
1Faculty of Economics and Administrative Sciences, European University of Lefke, Lefke, Northern Cyprus, Turkey. dkirikkaleli@eul.edu.tr.
Environmental Science and Pollution Research International
|October 24, 2023
Summary
Environmentally related taxes decrease environmental degradation in Canada. However, primary energy consumption and economic growth increase it, while financial development also positively impacts environmental sustainability. Policymakers can use these findings for effective environmental tax policies.
Area of Science:
- Environmental Economics
- Econometrics
- Canadian Environmental Policy
Background:
- Environmental quality is a growing concern globally.
- Understanding the drivers of environmental degradation is crucial for policy development.
- Canada faces challenges in balancing economic growth with environmental protection.
Purpose of the Study:
- To analyze the impact of environmentally related taxes (E-TAX) on environmental quality in Canada.
- To control for the effects of economic growth (ECG), financial development (FD), and primary energy consumption (PREC).
- To provide insights for policymakers on effective environmental tax strategies.
Main Methods:
- Utilized novel econometric approaches: nonlinear autoregressive distributed lag (N-ARDL) test and gradual shift causality (GS-C) test.
- Analyzed data from 1990Q1 to 2020Q4 in Canada.
- Examined the long-run cointegration between key environmental and economic variables.
Main Results:
- Confirmed a long-run cointegration equation among E-TAX, CO2 emissions (CO2E), ECG, FD, and PREC.
- Found that E-TAX significantly decreases environmental degradation.
- Identified PREC and ECG as drivers of increased environmental degradation.
- Observed a positive effect of FD on environmental sustainability.
Conclusions:
- Environmentally related taxes are effective tools for improving environmental quality in Canada.
- Economic growth and energy consumption negatively impact environmental quality.
- Financial development shows a positive correlation with environmental sustainability.
- Findings offer valuable guidance for designing effective environmental tax policies to mitigate human impact.
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