Environmental Tax Policy in Romania in the Context of the EU: Double Dividend Theory

Abstract

Abstract:In the last decade, environment protection gained much more significance in designing the economic policies in the European Union (EU) countries. There are many economic and policy differences between the European countries, despite of the harmonization process inside the EU area. The path of implementation of the environmental tax reforms in the EU countries differs greatly from one country to another and the effects of such taxation in the economic and environmental areas are manifold. The authors of this paper have agreed to undertake the task of testing the double dividend hypothesis of the environmental taxation in Romania (an energy-intensive country) versus the EU area as a whole, using Vector Error Correction Model (VECM) techniques and Ordinary Least Squares (OLS) estimations. Our findings show that this hypothesis is validated neither in Romania (in the economic growth area) nor in the EU area as a whole (in the unemployment area). Therefore, Romania cannot increase the level of the environmental tax for supporting economic growth, but it can grant environmental subsidies for decreasing the emissions and supporting the economic growth. This could be achieved by expanding the tax labor base and by collecting higher budgetary revenues to sustain such environmental subsidies. As far as the EU area is concerned, it is a necessary measure to continue the descending trend for the labor taxation to achieve the goal of improving the employment rate.

Can Environmental Tax Policy Really Help to Reduce Pollutant Emissions? An Empirical Study of a Panel ARDL Model Based on OECD Countries and China

“…Further literature review revealed that there are some comparative literature studies on the effect of environmental tax emission reduction. In terms of country comparisons, Radulescu et al concluded that the environmental taxes of both Romania and the European Union have good performance in environmental protection [46]. He et al explored the relationship between environmental tax, environmental performance, and economic development in China and Sweden, and then pointed out that governments should reform public relative environmental tax policy, especially regarding carbon taxes [47].…”

How Foreign Direct Investment Influences Carbon Emissions, Based on the Empirical Analysis of Chinese Urban Data

“…Jacobs et al [68] theoretically demonstrated that only if deadweight losses of taxes exceed their distributional benefits, a weak double dividend is feasible. However, Radulescu et al [69] found that subsidies have better effects than environmental tax on emissions in supporting the economic growth. Therefore, in view of the situation in China, future research needs to further explore the costs and effects of different regulatory measures such as environmental taxes and subsidies.…”

Economic Growth Effect and Optimal Carbon Emissions under China’s Carbon Emissions Reduction Policy: A Time Substitution DEA Approach

“…The Porter hypothesis argues that environmental protection can improve the quality and technological capabilities of the environment [4,5]. The strong form of the double dividend hypothesis also asserts that a green tax (such as carbon tax) does not only reduce pollution emissions and improve the environmental quality, but also increases non-environmental welfare and economic performance (economic efficiency or economic growth) [6,7].…”

“…The optimal carbon emissions b* of each province can be measured according to Equation (7). The results are shown in Figure 2.…”