Green Taxation and Sustainable GDP Growth in Emerging Economies: An Empirical Analysis

Abstract

This study examines the impact of green taxation on sustainable GDP growth in 22 emerging economies from 2005 to 2023, focusing on how environmental taxes interact with institutional quality, sectoral dynamics, and long-term economic growth. Grounded in theories like the Environmental Kuznets Curve and Porter Hypothesis, it develops a multidimensional framework incorporating green fiscal policies, institutional informality, and sectoral effects. Employing econometric techniques such as Fixed Effects, Random Effects, System GMM, and ARDL models alongside Principal Component Analysis to handle multicollinearity, the research analyses panel data to capture both immediate and delayed effects. Results show green taxation lacks significant short-term influence on GDP, but institutional strength, sectoral diversity, and sustainability efforts, especially targeted investments, play key roles in promoting growth. The study highlights that green taxes are more effective over the long run when combined with strong governance, transparent revenue recycling, and integration with broader development goals. It recommends embedding the environmental tax reforms within institutional and sectoral frameworks to improve effectiveness and public acceptance. This emphasizes the need to address informal sectors and ensure social equity through inclusive fiscal designs. By elucidating the complex nexus between fiscal policy and sustainable development, the research offers valuable policy guidance to support emerging economies in their transition toward green growth.

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