Understanding Environmental Taxation Dynamics: A Cross-National Examination of the European Union and the Western Balkans
Understanding Environmental Taxation Dynamics: A Cross-National Examination of the European Union and the Western Balkans

Summary/Abstract: This paper analyzes the specifics of environmental taxes in 27 EU countries and six Western Balkan countries based on data from 2009 to 2020. Initially, the study scrutinizes divergences in the design of environmental taxes within the observed countries, considering contextual particularities. Subsequently, it delves into an analysis of the revenue trends emanating from various categories of environmental taxation, coupled with an exploration of the correlation between environmental taxation dynamics and carbon dioxide (CO2) emissions. The empirical findings unveil a stark discrepancy in the prominence accorded to environmental taxation mechanisms between EU member states and their Western Balkan counterparts. Notably, the present forms of environmental taxes in Western Balkan countries mostly relate to environmental fees, which suggests that Western Balkan countries lag behind in terms of regulatory compliance with the EU. The results of a robust correlation analysis revealed that the increase in revenue from environmental taxes within EU member states is more strongly correlated with the reduction of CO2 emissions than their Western Balkan counterparts. Specifically, Finland and France have recorded a strong negative correlation between total revenue from environmental taxes and CO2 emissions, -0.7748 and -0.7214, respectively, which is somewhat explained by their historical background in instituting CO2 taxation frameworks. From all the aforementioned, it can be concluded that the governments within the Western Balkan region should pay significantly more attention to the issues of differentiation of the tax base according to CO2 emissions, in an effort to reduce CO2 emissions and thereby bring the region closer to EU standards in the fields of environmental and fiscal policies.

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