Panel data analysis of the effects of environmental policies on sustainable growth in OECD countries

In response to the increasing production driven by industrialization and technological advancements, economic growth has been fostered, but this has also led to significant environmental damage. This dual impact has resulted in pressing global issues such as climate change and environmental pollution. To mitigate these adverse effects and safeguard the environment, environmental taxes have been implemented. However, the outcomes of these tax strategies can vary. The relationship between tax policies and economic growth is complex, leading to both positive and negative impacts. In some countries, environmental taxes have detrimental effects, while in others, they promote economic growth, especially when combined with eco-friendly technologies. This study aims to explore the impact of environmental taxes on economic growth. Using data from 30 OECD countries spanning 2000-2020, the effects were analyzed through panel data analysis employing the Augmented Mean Group (AMG) cointegration estimators. The findings reveal a negative relationship between environmental taxes and economic growth. Additionally, the explanatory variables of labor and capital formation were found to positively influence economic growth.