How Do Environmental Taxes Affect Green Finance? Upper middle income Example

Abstract

Countries are increasing financing for renewable energy projects that reduce pollution and are also helping the transition to a sustainable economy. Green finance increases resource efficiency and ensures that it is used in the best way. Environmental taxes encourage green financing in countries with high emissions. Therefore, in this study, the relationship between green financing and environmental taxes of 10 countries with upper middle income income in the 2004-2020 period is examined. According to the empirical findings, it is seen that the variables are stationary at the I(1) level. At the same time, the findings of cointegration show that there is a long-term relationship between green financing and environmental taxes of 10 countries with upper middle incomes. The findings of the Dumitrescu & Hurlin causality test also indicate that environmental taxes are the cause of green financing. As a result, this evidence provides advice to both policymakers and investors on environmental taxes in promoting green finance.