Evaluating the impact of environmental taxes on energy use: evidence from OECD countries

This paper evaluates the causal impact of Environmental Tax Reforms (ETRs) on energy and macroeconomic outcomes in OECD countries between 2000 and 2020. Using a staggered difference-in-differences framework combined with instrumental variables, we identify 11 substantive reforms involving sizable increases in effective carbon or energy tax rates and explicit revenue recycling. The results show that within five years of implementation, ETRs reduce per-capita energy use by 6–9 percent and lower energy intensity by 5–6 percent, while increasing the share of renewable energy in total primary energy supply by 3–4 percentage points. No statistically significant effect on GDP per capita is detected, indicating that environmental improvements occur without measurable short-run economic losses. Effects are stronger in high energy-use economies and where revenues are recycled to households or firms. These findings support the double-dividend hypothesis and highlight the role of well-designed price-based instruments in accelerating sustainable energy transitions.