Work

Green Fiscal Instruments and the Circular Economy Transition in the EU-27: Does the Structure of Environmental Taxation Matter?

Year: 2026

Type: article

Abstract: The European Union has set the target of doubling the share of secondary materials in overall consumption by 2030. Nevertheless, in 2024 this share reached only 12.2%, while the environmental tax systems of the member states remain dominated by energy excise duties. Against this background, the article investigates whether the size, structure, temporal profile and territorial distribution of environmental taxation matter for the circular transition. The study uses a balanced panel of the 27 EU member states over the period 2010–2024. For the economic indicators of the circular sectors, the period 2005–2023 is used. Circular outcomes are measured through five indicators from the EU's official monitoring framework, with the database constructed entirely from Eurostat sources. The methodology combines two-way fixed-effects models with clustered standard errors, lag specifications, two-step system GMM, and models with interactions and conditional marginal effects. The results show that the overall environmental tax burden is not systematically associated with circular outcomes. When the aggregate indicator is decomposed, however, divergent effects emerge. Energy taxes are associated with lower private investment in the circular sectors, whereas pollution taxes display a positive relationship with their value added. Resource taxes remain too limited as a fiscal share for their effect to be reliably estimated. The dynamic analysis shows that the fiscal effects manifest with a lag of around two years. Furthermore, they are concentrated mainly in the weakly agricultural economies and weaken as agricultural specialisation increases. Consequently, uniform green fiscal instruments do not lead to identical circular outcomes across all member states. The findings support the need to reorient taxation towards pollution and resources, a compensatory design for the energy-intensive circular industries, and territorial differentiation through the targeted use of revenues in rural areas.

Source: Journal of risk and financial management

DOI: 10.3390/jrfm19090724

Authors: Vanya Georgieva, Nadezhda Blagoeva

Institution: Agricultural University Plovdiv

Language: English

Topic: Climate Change Policy and Economics

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDGs: Responsible consumption and production, Climate action

Open Access status: hybrid

Estimated APC paid: $1,689