International Conference on Economics, Finance & Business, London

DOES ENVIRONMENTAL PROTECTION COME AT THE EXPENSE OF ECONOMIC DEVELOPMENT?

IOANA LAURA TIBULCA

Abstract:

The focus of this research is to analyze the impact of environment taxes on economic complexity as a measure of an economy’s production potential and sophistication. The goal is to determine if protecting the environment by using green taxes will have a significant negative impact on the economy of the countries that have decided to use such fiscal policy tools. The research uses data from 25 OECD member state for a period of 10 years. The research method is estimation of regression models using the generalized method of moments (GMM). Energy taxes, pollution taxes and resources taxes all have a negative, statistically significant impact on economic complexity. These results underline the precarious balance that government policy measures need to achieve between protecting the environment and achieving economic development through a sustainable increase in economic complexity and production capacity. However, this new research results reveal a way for the OECD member states to achieve the elusive balance between environment protection and economic complexity: the use of resources taxes.

Keywords: environment taxes, economic complexity, resources taxes