ESC

Clarivate

JCR Category: Business in ESCI edition

Entrepreneurship and Sustainability Issues Open access
Journal Impact FactorTM (2025) 1.5 Q3
Journal Citation IndicatorTM (2025) 0.25 Q4
Received: 2025-10-11  |  Accepted: 2025-12-30  |  Published: 2026-03-30

Title

Evaluating the impact of environmental taxes on energy use: evidence from OECD countries


Abstract

This paper evaluates the causal impact of Environmental Tax Reforms (ETRs) on energy and macroeconomic outcomes in OECD countries between 2000 and 2020. Using a staggered difference-in-differences framework combined with instrumental variables, we identify 11 substantive reforms involving sizable increases in effective carbon or energy tax rates and explicit revenue recycling. The results show that within five years of implementation, ETRs reduce per-capita energy use by 6–9 percent and lower energy intensity by 5–6 percent, while increasing the share of renewable energy in total primary energy supply by 3–4 percentage points. No statistically significant effect on GDP per capita is detected, indicating that environmental improvements occur without measurable short-run economic losses. Effects are stronger in high energy-use economies and where revenues are recycled to households or firms. These findings support the double-dividend hypothesis and highlight the role of well-designed price-based instruments in accelerating sustainable energy transitions.


Keywords

Environmental Tax Reform (ETR), energy intensity, renewable energy, difference-in-differences, OECD, sustainability policy


JEL classifications

Q43 , Q58


URI

http://jssidoi.org/jesi/article/1394


DOI


Pages

97-113


Funding


This is an open access issue and all published articles are licensed under a
Creative Commons Attribution 4.0 International License

Authors

Domingues, Nuno Soares
Instituto Politécnico de Lisboa, Lisbon, Portugal https://www.ipl.pt
Instituto Superior de Engenharia de Lisboa, Lisbon, Portugal https://isel.pt
Articles by this author in: CrossRef |  Google Scholar

Stanelytė, Daiva
Klaipėdos valstybinė kolegija / Higher education institution, Klaipeda, Lithuania https://www.kvk.lt
Articles by this author in: CrossRef |  Google Scholar

Journal title

Entrepreneurship and Sustainability Issues

Volume

13


Number

3


Issue date

March 2026


Issue DOI


ISSN

ISSN 2345-0282 (online)


Publisher

VšĮ Entrepreneurship and Sustainability Center, Vilnius, Lithuania

Cited

Google Scholar

Article views & downloads

HTML views: 779  |  PDF downloads: 654

References


Aldy, J. E., & Pizer, W. A. (2015). The competitiveness impacts of climate change mitigation policies. Journal of the Association of Environmental and Resource Economists, 2(4), 565-595. https://doi.org/10.1086/682949

Search via ReFindit


Andersson, J. J. (2019). Carbon taxes and CO₂ emissions: Sweden as a case study. American Economic Journal: Economic Policy, 11(4), 1-30. https://doi.org/10.1257/pol.20170144

Search via ReFindit


Borovsyak, K., Hull, P., & Jaravel, X. (2022). Quasi-experimental shift-share research designs. Review of Economic Studies, 89(1), 181-213. https://doi.org/10.1093/restud/rdab030

Search via ReFindit


Borusyak, K., Jaravel, X., & Spiess, J. (2024). Revisiting event-study designs: Robust and efficient estimation. Review of Economic Studies, 91(6), 3253-3285. https://doi.org/10.1093/restud/rdae007

Search via ReFindit


Bruvoll, A., & Larsen, B. M. (2004). Greenhouse gas emissions in Norway: Do carbon taxes work? Energy Policy, 32(4), 493-505. 00151-4 https://doi.org/10.1016/S0301-4215(03)

Search via ReFindit


Callaway, B., & Sant’Anna, P. H. C. (2021). Difference-in-differences with multiple time periods and heterogeneous treatment effects. Journal of Econometrics, 225(2), 200-230. https://doi.org/10.1016/j.jeconom.2020.12.001

Search via ReFindit


Carattini, S., Kallbekken, S., & Orlov, A. (2019). How to win public support for a global carbon tax. Nature, 565(7739), 289-291. https://doi.org/10.1038/d41586-019-00124-x

Search via ReFindit


Chiki, Z., El Boutalbi, Y., Jafrane, C., Katina, J., El Amrani El Idrissi, N., Lamcharfi, T., & Idrissi Kandri, N. (2025). Renewable energy landscapes: a comparative analysis of Lithuania's, Europe's, and Africa's green strategies. Insights into Regional Development, 7(1), 10-23. https://doi.org/10.70132/c7824282627

Search via ReFindit


de Chaisemartin, C., & D’Haultfœuille, X. (2021). Two-way fixed effects estimators with heterogeneous treatment effects. American Economic Review, 111(9), 3241-3287. https://doi.org/10.1257/aer.20181169

Search via ReFindit


Dimitriades, D. (2023). Do environmental taxes affect energy consumption and energy intensity? An empirical analysis of OECD countries. Economic Change and Restructuring, 56(2), 1645-1670. https://doi.org/10.1080/23322039.2022.2156094

Search via ReFindit


Domingues, N. (2009). Influence of the renewable energy in the simulation of liberalised markets. 2009 International Joint Conference on Computational Sciences and Optimization, 2, 480-484). IEEE. https://doi.org/10.1109/CSO.2009.122

Search via ReFindit


Domingues, N. (2012). The hidden costs of electricity and their impact in the system. In 2012 International Conference on Smart Grid Technology, Economics and Policies (SG-TEP) (1-5). IEEE. https://doi.org/10.1109/SG-TEP.2012.6642399

Search via ReFindit


Domingues, N., Neves-Silva, R., & de Melo, J. J. (2017). Decision making in the electricity sector using performance indicators. Energy, Ecology and Environment, 2(1), 60-84. https://doi.org/10.1007/s40974-016-0043-6

Search via ReFindit


Ekins, P., & Speck, S. (2011). Environmental tax reform (ETR): A policy for green growth. Oxford University Press.

Search via ReFindit


Enerdata. (2023). Global CO₂ emissions per tonne of oil equivalent (toe) of energy consumption. Enerdata Yearbook. Retrieved from https://yearbook.enerdata.net/co2-fuel-combustion/

Search via ReFindit


European Commission. (2003). Council Directive 2003/96/EC of 27 October 2003 restructuring the Community framework for the taxation of energy products and electricity. Official Journal of the European Union, 283, 51-70. https://eur-lex.europa.eu/eli/dir/2003/96/oj

Search via ReFindit


European Environment Agency. (2000). Environmental taxes: Recent developments in tools for integration (Environmental Issue Report No. 18). Retrieved from https://www.eea.europa.eu/publications/Environmental_Issues_No_18

Search via ReFindit


European Environment Agency. (2016). Environmental taxation and EU environmental policies (EEA Report No. 17/2016). Retrieved from https://www.eea.europa.eu/publications/environmental-taxation-and-eu-environmental-policies

Search via ReFindit


Flues, F., & Thomas, A. (2015). The distributional effects of energy taxes (OECD Taxation Working Papers No. 23). OECD Publishing. https://doi.org/10.1787/5js1qwkqqrbv-en

Search via ReFindit


Fullerton, D., & Metcalf, G. E. (1998). Environmental taxes and the double-dividend hypothesis: Did you really expect something for nothing? Chicago-Kent Law Review, 73(1), 221–256. https://doi.org/10.3386/w6199

Search via ReFindit


Goodman-Bacon, A. (2021). Difference-in-differences with variation in treatment timing. Journal of Econometrics, 225(2), 254-277. https://doi.org/10.1016/j.jeconom.2021.03.014

Search via ReFindit


Goulder, L. H. (1995). Environmental taxation and the double dividend: A reader’s guide. International Tax and Public Finance, 2(2), 157-183. https://doi.org/10.1007/BF00877495

Search via ReFindit


Haider, M. F., Ferraz, D., & de Mello, L. (2021). The role of environmental taxes in achieving environmental goals: Evidence from OECD countries. Energy Economics, 104, 105658. https://doi.org/10.1016/j.eneco.2021.105658

Search via ReFindit


Ikram, M., Zhou, P., Shah, S. Z. A., & Liu, G. Q. (2023). Environmental taxes and renewable energy: Cross-country evidence. Renewable Energy, 203, 196-207. https://doi.org/10.1016/j.renene.2023.02.062

Search via ReFindit


Ikram, R. M., Ma, Q., Sroufe, R., & Rehman, H. U. (2023). The role of environmental taxes in stimulating green innovation and renewable energy adoption: A global perspective. Journal of Cleaner Production, 434, 140224. https://doi.org/10.1016/j.jclepro.2023.140224

Search via ReFindit


International Carbon Action Partnership. (2021). EU: European Union emissions trading system (EU ETS). Retrieved from https://icapcarbonaction.com

Search via ReFindit


International Energy Agency. (2021). World energy outlook 2021. OECD/IEA.

Search via ReFindit


International Monetary Fund. (2019). Fiscal monitor: How to mitigate climate change. IMF.

Search via ReFindit


International Monetary Fund. (2023). World economic outlook database. IMF.

Search via ReFindit


Kohlscheen, E., Laverde, R., & Rungcharoen, R. (2024). The macroeconomic effects of carbon taxes (IMF Working Paper No. 2024/007). International Monetary Fund. https://doi.org/10.5089/9798400251789.001

Search via ReFindit


Leitão, N. C., Marques, D. C., & Ratten, V. (2025). The impact of environmental taxes and renewable energy on carbon dioxide emissions in OECD countries. Energies, 18(10), 2543. https://doi.org/10.3390/en18102543

Search via ReFindit


Metcalf, G. E. (2019). On the economics of a carbon tax for the United States. Brookings Papers on Economic Activity, 2019(1), 405-458. https://doi.org/10.1353/eca.2019.0003

Search via ReFindit


Öner, K., & Çetin, M. (2023). Environmental taxes and sustainable development in the EU: A decade of data-driven insights. Economies, 11(7), 180. https://doi.org/10.3390/economies11070180

Search via ReFindit


Organisation for Economic Co-operation and Development. (2019). Taxing energy use 2019: Using taxes for climate action. OECD Publishing. https://doi.org/10.1787/058ca239-en

Search via ReFindit


Parry, I. W. H., Black, S., & Roaf, J. (2022). Carbon pricing: What role for border carbon adjustments? International Monetary Fund. https://doi.org/10.5089/9798400207649.001

Search via ReFindit


Purohit, D., & Baxi, P. (2025). Asymmetric effects of environmental taxes, regulatory quality, and fossil fuel use on renewable energy consumption: A quantile analysis of G-20 countries. Journal of Tax Reform, 11(3), 395-424. https://doi.org/10.15826/jtr.2025.11.3.123

Search via ReFindit


Resources for the Future. (2021). Social cost of carbon 101. Retrieved from https://www.rff.org/publications/explainers/social-cost-of-carbon-101/

Search via ReFindit


Rezk, M. R., Hassan, M. M., Omoruyi, T. U., El-Bary, A. A., & Piccinetti, L. (2025). Policy options in accelerating circular economy adoption in the Gulf countries. Insights into Regional Development, 7(2), 43-66. https://doi.org/10.70132/h2693793554

Search via ReFindit


Roth, J. (2022). Pre-test with caution: Event-study estimates after testing for parallel trends. American Economic Review: Insights, 4(3), 305-322. https://doi.org/10.1257/aeri.20210658

Search via ReFindit


Roth, J. (2023). Honest parallel trends testing. The Quarterly Journal of Economics, 138(1), 597-651. https://doi.org/10.1093/qje/qjac036

Search via ReFindit


Speck, S., & Jilkova, J. (2009). Design of environmental tax reforms in Europe. In M. S. Andersen & P. Ekins (Eds.), Carbon-energy taxation: Lessons from Europe (pp. 24-52). Oxford University Press. https://doi.org/10.1093/acprof:oso/9780199570683.003.0002

Search via ReFindit


Sun, L., & Abraham, S. (2021). Estimating dynamic treatment effects in event studies with heterogeneous treatment effects. Journal of Econometrics, 225(2), 175-199. https://doi.org/10.1016/j.jeconom.2020.09.006

Search via ReFindit


Sveinsson, O. (2024). Investigating the effects of environmental tax revenues on economic development: The case of Nordic countries. Sustainability, 16(18), 7957. https://doi.org/10.3390/su16187957

Search via ReFindit


World Bank. (2023). World development indicators. Retrieved from https://databank.worldbank.org

Search via ReFindit


Zhang, B., Du, Y., & Zhang, Y. J. (2023). Environmental taxes, green innovation and energy transition. Energy Policy, 178, 113580. https://doi.org/10.1016/j.enpol.2023.113580

Search via ReFindit


Zhang, H., Fan, J., & Li, G. (2023). Environmental tax policy and energy structure transition: Evidence from a panel of 30 OECD countries. Energy Policy, 179, 113645. https://doi.org/10.1016/j.enpol.2023.113645

Search via ReFindit