Individuals and countries can't perform their economic activities without using energy to maintain economic growth and development (Vera and Sauma 2015). Especially in the 20th century, with the rapid growth of industrialization, intense population growth, and technological developments, the need for energy has increased significantly. This increasing need for energy has resulted in excessive use of natural resources and has increased the demand for fossil fuels such as oil, coal, and natural gas worldwide.
The primary causes of ED, climate change and global warming are greenhouse gas emissions from the use of non-renewable energy sources (Babatunde et al. 2017; Lin and Jia 2018). One of the most powerful greenhouse gas emissions is CO2. However, at the global level, reducing carbon emissions, promoting a low-carbon economy, and implementing low-carbon economic activities are critical for achieving sustainable development. Therefore, ED, climate change and global warming; have become some of the most discussed topics among scientists, politicians, and business circles (Lin and Jia 2018).
In the “Global Weather 2019” report published by the American Institute of Health Effects, it was reported that air pollution ranked 5th among all health risk factors in the world. Furthermore, the intergovernmental panel on climate change advised that global warming be limited to 1.5°C, or the planet will experience catastrophic climate change by 2030. If unchecked, air pollution and climate change will increase the likelihood of severe widespread and irreversible risks to humans and ecosystems. Therefore, the need to reduce carbon emissions is urgent (Li and Peng 2020). In reality, if no meaningful emission reduction is achieved, the global atmosphere temperature may increase between 2.5°C and 7.8°C by the end of the century. More countries are joining in the cooperation agreement on climate change to reduce this great threat facing the world and accelerate the global transition to green and low-carbon sustainable development (Liu 2019).
ED has become one of the greatest threats facing humanity, affecting not just human health but also economic growth (World Bank 2016). According to the United Nations, “if immediate action is not taken, the devastating impact of climate change will be greater than the present COVID-19 pandemic.” In essence, the world is far from the target of limiting the global temperature increase to 1.5°C specified in the Paris Agreement (UN 2020). Because for energy consumption to boost economic growth; increases atmospheric CO2 emissions, which cause climate change and global warming (Wolde-Rufael and Mulat-Weldemeske 2021).
Sustainable environmental quality is an essential part of successful sustainable economic development. Many studies have suggested that lower carbon emissions improve environmental quality. The expansion in economic activities contributes to environmental problems such as climate change and ED, as it contributes to a significant increase in greenhouse gas emissions, especially carbon emissions (Bashir et al. 2020). Carbon emission remains the main factor among greenhouse gases today, and the rise in emissions is due to the harmful use of non-renewable energies (Ghazouani et al. 2020). Because of intense industrial and economic activities, global energy consumption increased by 2.3% in 2018, resulting in a 1.7% increase in carbon emissions, from 32.5 to 33.1 gigatons. This increase poses a threat to environmental initiatives at the global level, and countries are committed to reducing their carbon emissions to preserve environmental quality (Bashir et al. 2020).
Although carbon emission was primarily used to test the Environmental Kuznets Curve hypothesis, it does not appear that the carbon emission alone can capture all environmental damage, as it is a pollutant indicator (Saleem et al. 2019). Therefore, while carbon emissions are generally acknowledged as the primary cause of environmental pollution, other indicators also affect environmental pollution. For example, the reduction of biodiversity, the destruction of forests and fertile agricultural lands, and the pollution of natural water resources. Thus, there is a need for a more comprehensive indicator than carbon emissions to represent environmental pollution (Aydın, 2020: 138). This indicator is known as EF.
Consequently, to measure the total human pressure on the natural environment, the concept of “environmental” or “ecological” footprint is used as a general term for different footprint concepts developed in the last two decades (Hoekstra and Weidmann 2014). The first study on this concept was conducted by Rees (1992). Wackernagel (1994), thus, implemented the concept and the calculation methods related to it. Wackernagel and Rees explained the relationship between EF and sustainable development in the book they published in 1996 and detailed their EF calculation methods (Wackernagel and Rees 1996). Recently, the ratio between the existing resources and the global consumption of these resources; is now expressed with the concept of EF. The EF reveals how many natural resources are consumed by an individual, city, region, state, or by people around the world to meet their needs and wants, which includes the following: food consumption, shelter, transportation, waste generated and allows to compare specific activities and their effects on the environment and natural resources (Belčáková et al. 2017).
However, compared to carbon emissions, EF; is a more comprehensive measure in terms of detecting ED because it covers the environment in all its dimensions, including multifaceted environmental indicators like settled lands, carbon emissions, cultivated lands, fishing areas, grazing lands, and forest products. Indeed, one of the most important sustainability indicators in today's world is the EF, together with the green economy (Zahra et al. 2020). The EF is an effective tool to measure the impact of human consumption on nature and the resources needed to meet human needs (Sun et al. 2020; Zahra et al. 2021). However, economic globalization has strengthened the ties between countries and has caused the EF of each country to change by exporting the pressure on the environment from the consumer country to the exporting country that supplies goods and services to this country (Sun et al. 2020).
Nevertheless, environmental problems increase the pressure on governments to reduce environmental damage without hindering economic growth (OECD 2011). Because studies on the environment show the net effect of global warming and the need for a global intervention to reduce greenhouse gases. Therefore, governments must implement strong environmental policies that limit the growing dependence on fossil fuels such as oil, natural gas, and coal; to reduce the increase in greenhouse gas emissions (Gemechu et al. 2012). Hence, governments have a range of tools such as regulations, information programs, environmental subsidies, and ETs. Among these tools, especially ETs have special significance (OECD 2011) and are included in tax legislation by many countries.
ETs are the most effective policy tool for reducing greenhouse gas emissions (Bashir et al. 2020). It aims to tax carbon emissions to increase energy efficiency, reduce environmental problems, and contribute to the protection of the environment; by internalizing negative externalities in the form of environmental pollution (Shahzad 2020; Kou et al. 2021; Bashir et al. 2021). In particular, it is potentially applied to goods that harm scarce natural resources (Rafique et al. 2021). ETs directly address market failure that causes markets to ignore environmental impacts. A well-designed ET raises the price of a good or activity to reflect the cost of environmental damage to others (OECD 2011). Accordingly, ETs refer to taxes applied to internalize environmental externalities. Because activities that cause greenhouse gas emissions, or more environmental pollution, are relatively not expensive. Individuals or firms do not consider the costs that emissions impose on others, especially future generations. A tax to be applied will force the units that cause the externality to consider all the consequences of this externality (Metcalf and Weisbach, 2013). Simultaneously, they are based on the Pigouvian tax, which is levied to burden the companies that emit external damage with the cost of the harm they cause to the society and are based on the polluter pays principle (Kou et al. 2021). According to the polluter pays principle, economic actors can strengthen pollution regulation or adopt cleaner production techniques. They can also reduce pollution emissions to internalize the external cost of pollution by analyzing cost-effectiveness (Lai et al. 2020). In addition, these taxes can contribute to the improvement of environmental quality by motivating the manufacturing sector to develop efficient technologies or producing environmentally friendly products (Jeager 2013; Elkins and Barker 2001; Rafique et al. 2021).
The European Union's (EU) official statistics evaluate ET revenues under four main groups, allowing for international comparisons. These are energy taxes, transport taxes, pollution taxes, and natural resource taxes (Eurostat 2013). From these taxes, energy taxes are collected on energy products such as coal, petroleum products, natural gas, and electricity used for both fixed and transportation purposes. Transport taxes mainly include taxes on the ownership and use of motor vehicles. Pollution and natural resource taxes, on the other hand, cover different tax types, whereas natural resource taxes are collected as the rental price of oil and mines (Eurostat 2021). Energy taxes are levied to reduce carbon emissions. The general purpose of transportation taxes is to contribute to the measures aimed at reducing carbon emissions and protecting the environment. Natural resource taxes, however, are levied to reduce environmental wastes originating from mines.
ETs in Turkey are not applied to solve environmental problems. In reality, the only tax put into practice to prevent environmental pollution and activities that will cause pollution is the Environmental Cleaning Tax. However, taxes such as Special Consumption Tax and Motor Vehicle Tax applied in Turkey have possible effects on the environment. Hence, they can be considered as an ET. Consequently, some existing taxes in Turkey that fall under the categories specified in the EU classification have an environmental character in terms of their effects. The share of ET revenues in total tax revenues is an indicator of the importance that countries attach to ETs. In terms of the share of ETs in total tax revenues, Turkey ranks high among OECD countries. However, the reason for this situation is not because of the importance Turkey gives to ETs. The primary reason is due to the structure of the Turkish tax system.
This study investigates the long-run effects of ETs on EF and CO2 emissions in Turkey by performing non-linear time series analysis and thus, contributing to the literature. In the second part of the study, the literature section, which includes studies investigating the relationship between ETs and ED, is included. The data set, model and methodology are presented in the third section and the estimation results are evaluated in the fourth section. The final section contains the conclusions and policy recommendations.