Do energy taxes reduce the carbon footprint? Evidence from Turkey

Abstract

This study examines the effect of energy taxes on the carbon footprint in Turkey using the data set for 1994-2017. Johansen cointegration tests were used in this study to analyze the existence of a long-term relationship between the variables. Moreover, the estimation methods “dynamic ordinary least squares” (DOLS) and “fully modified ordinary least squares” (FMOLS) were applied to determine the long-term cointegration coefficients. The results of the Johansen cointegration analysis confirm that there is a long-term cointegration relationship between the variables. In addition, the results of DOLS and FMOLS show that an increase in energy taxes reduces the carbon footprint in the long term. In conclusion, the results of the study suggest that environmental taxes can be used as an effective alternative policy tool to achieve certain environmental quality standards. In addition, the results provide evidence that such taxes can influence costs and, by doing so, have an effect on the economic decision units’ habits of environmentally harmful production and consumption.