Do transport taxes reduce air pollution in the top 10 countries with the highest transport tax revenues? A country-specific panel data analysis

Abstract

Recently, policymakers have been developing some policies to improve environmental quality. Environmental taxes are the most important of these policies. This study examines the effects of transport taxes, economic growth, and fossil fuel energy consumption on air pollution within the Environmental Kuznets Curve (EKC) hypothesis framework. The study used data from 1994 to 2019 for the ten countries with the highest transport tax revenues. According to the results, while the EKC hypothesis is valid for Portugal and Switzerland, it is not valid for all other countries. Moreover, fossil fuel energy consumption seems to increase air pollution in all countries except the Netherlands and Switzerland. However, transport taxes increase air pollution in Brazil. Therefore, transport taxes are not effective in reducing air pollution. In this context, it was concluded that the structure of transport taxes should be improved or reformed. In addition, it has been underlined that those national decisions alone will not be sufficient to improve transport taxes or environmental taxes. Therefore, regulations to be made with international coordination will be more successful in combating environmental problems by preventing tax competition and increasing tax harmonization.