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Environmental taxation and inclusive green growth in developing countries: does the quality of institutions matter?

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Abstract

The promotion of inclusive green growth is one of the most debated topics in international forums and is considered a major concern by all countries in the world. Although the existing literature has examined several determinants of inclusive green growth, the impact of environmental taxation on inclusive green growth is relatively little explored. This study is therefore the first attempt to examine the impact of the environmental tax on inclusive green growth for developing countries from 2000 to 2021. To do this, we apply the system generalised method of moments (GMM) that controls unobserved heterogeneity, heteroskedasticity, simultaneity, reverse causality and endogeneity. The empirical results show that environmental tax promotes inclusive green growth. In addition, our results indicate that the control of corruption, government efficiency, the quality of regulation and the rule of law interact with the environmental tax to promote inclusive green growth. Furthermore, this study reveals interestingly that the environmental tax has a positive impact on the two components of inclusive growth and green growth, but the institutional factors that accentuate the impact of the environmental tax are somewhat nuanced. The results of the study have important policy implications for decision-makers in developing countries in promoting inclusive and environmentally friendly growth.

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Fig. 1

Source: authors’ construction

Fig. 2

Source: authors’ construction

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Fig. 4

Source: authors’ construction

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Data availability

The study uses publicly available secondary data sources via the World Bank (WID), https://databank.worldbank.org/source/world-development-indicators?; UNCTAD, https://unctadstat.unctad.org/wds/ReportFolders/reportFolders.aspx?sCS_ChosenLang=fr; GGKP, https://www.greengrowthknowledge.org/data-explorer; PWT, https://www.rug.nl/ggdc/; OECD, https://stats.oecd.org/Index.aspx?DataSetCode=SNA_TABLE3; and IMF/Climate Change Dashboard, https://climatedata.imf.org/.

Notes

  1. The list of countries is provided in the Appendix. The 36 countries included in this study are classified by UNCTAD as developing countries.

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  1. Faculty of Economic Sciences, Marien Ngouabi University—UMNG, Av. Bayardelle, 69, Brazzaville, Republic of Congo

    Idrys Fransmel Okombi & Van Breg-Dony Ndoum Babouama

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IFO gave the subject of the paper, guided the problem statement and wrote the introduction and conclusion. VBDBN wrote the stylised facts, theoretical framework and empirical review, as well as the methodology and interpretation of the results.

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Correspondence to Idrys Fransmel Okombi.

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Appendix

Appendix

List of countries: Congo, Congo, Rép. dém. Du, Côte d’Ivoire, Ghana, Maroc, Niger, Nigéria, Sénégal, Togo, Tunisie, Argentine, Bolivie, Brésil, Chili, Colombie, Costa Rica, Équateur, Guatemala, Honduras, Mexique, Nicaragua, Paraguay, Pérou, Bangladesh, Cambodge, Chine, Inde, Kazakhstan, Kirghizistan, Malaisie, Mongolie, Pakistan, Philippines, Singapour, Thaïlande and Türkiye.

Table 13 Main components and eigenvalues for inclusive green growth
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Table 14 Correlation matrix
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Fig. 5
figure 5

Source: authors’ construction

Mean evolution of inclusive green growth and economic growth.

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Fig. 6
figure 6

Effects of institutional quality on environmental taxes

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Okombi, I.F., Ndoum Babouama, V.BD. Environmental taxation and inclusive green growth in developing countries: does the quality of institutions matter?. Environ Sci Pollut Res (2024). https://doi.org/10.1007/s11356-024-33245-6

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