Environmental Tax, Energy Consumption, and Pollution Reduction: Evidence from Developing Economies

Abstract

The study examines the effect of environmental tax on environmental quality through the mediating role of energy consumption in developing countries from 2000 to 2020. Employing Seemingly Unrelated Regression (SUR), the effects of environmental taxes on energy consumption patterns and onward environmental upshots are empirically analyzed. The results show that imposition of environmental tax reduces energy consumption and resultantly improves environmental quality. The findings reveal that market-based policy tools strengthen sustainable energy demand and reduce environmental deterioration. The analysis provides insights to formulate effective policy measures to attain the sustainable environment goal.