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Green Tax Shocks and Economic Growth

Author

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  • Mikidadu Mohammed

    (Department of Economics and Business Administration, Austin College, 900 North Grand Avenue Sherman, TX 75090, USA.)

Abstract

The purpose of this paper is to examine the long-run relationship between green tax and economic growth. Specifically, it utilizes the sign-restrictions structural vector autoregressions to examine whether green tax is growth-enhancing or growth-inhibiting. Using data on the Danish economy for the period 1975-2017, the results reveal that green tax shocks trigger opposite movements in non-renewable and renewable energy consumption, and a mild transitory decrease in economic growth. The study also compares green tax shocks in the pre- and post-Carbon tax periods and finds that how the Danish economy experiences green tax shocks has not fundamentally changed since the introduction of Carbon tax in 1992. Taken together, the findings suggest that green tax is effective in increasing reliance on renewable energy while decreasing non-renewable energy consumption without seriously inhibiting economic growth.

Suggested Citation

  • Mikidadu Mohammed, 2020. "Green Tax Shocks and Economic Growth," International Journal of Energy Economics and Policy, Econjournals, vol. 10(2), pages 302-318.
    • Handle: RePEc:eco:journ2:2020-02-36
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    References listed on IDEAS

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    More about this item

    Keywords

    green tax; carbon tax; economic growth; structural var;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • O44 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Environment and Growth
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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