Don’t look earth: environmental taxes effect on Co2 emissions, evidence from moments quantile regression for EU countries

This study explores the roles of selected European Union members in the struggle for environmental externalities in the impact of energy and transport taxes on carbon dioxide emissions. It can be said that fiscal tools have an impact on the strife of the climate crisis that has not yet been agreed upon by policymakers. We research the effects of energy and transport taxes on per capita carbon dioxide emissions using the Moments Quantile Regression (MM-QR) estimator, which is a novel method for panel data. For the 1995–2020 period, firstly, we divided the 23 countries into two groups (Panel A: 10 countries, and Panel B: 13 countries) according to their per capita income. Those above the median have relatively higher per capita income and vice versa for low-income individuals. Second, we estimate the quantile coefficients using the hybrid EKC model. The findings show that the inverse U-shaped curve is valid for nearly all quantiles in Panel A. Transport tax has an increasing effect in all quantiles, whereas energy tax has a decreasing effect on Co2 emissions in Panel A. We find an inverse U-shaped curve from the 10th to 30th quantiles in relatively low-income EU countries. MM-QR results show that the transport tax has an increased effect and the energy tax has a decreased effect on Co2 emissions for Panel B. These results can guide policies in which different tax policies should be used for different income and carbon dioxide emission levels.