Are climate taxes used as tools to tackle environmental challenges in food industry?

Abstract

This paper examines the nexus of climate taxes and environmental expenditures. The expectation of a statistically significant positive relationship between climate tax revenues and environmental protection expenditure assumes that when countries aim to mitigate the negative impacts of climate change on the environment by introducing climate taxes, they should spend the generated revenue on environmental protection, too. The regression analysis is conducted on a sample that comprises 30 European countries from 2000 to 2023, including 27 current European Union members and Norway, Iceland, and Switzerland. To address potential differences across countries, the sample is divided into subsamples using cluster analysis, and the time period is divided into subperiods to capture potential turbulence caused by economic and non-economic shocks. The regression analysis results are ambiguous. By testing the expectation about the positive relationship between climate tax revenues and environmental protection expenditures several turnovers in the relationship are revealed, which corresponds to the periods of crises hampering the economies and causing the a shift away from policies improving the environment in favor of countercyclical government interventions, and other external factors, such as changes in environemtal policy, mainly adopted in the EU countries.