Liveta Miliauskaite

Type of the article: Research Article

Abstract
The modern tax system must support the transition to a carbon-neutral economy. Increasing the environmental tax burden is the most effective measure to achieve this goal. In this context, it is essential to assess the determinants of energy tax rates in European Union countries and understand the crucial conditions for making informed policy decisions. This study contributes to the existing literature by examining the determinants of energy tax rates. It incorporates not only macroeconomic, energy efficiency, and environmental factors, but also indicators of companies’ financial performance. The study analyzes a sample of European Union countries from 2010 to 2020, using fixed effects panel regression analysis. The results indicate a negative relationship between energy tax rates and energy intensity (β = –0.347), the return on equity of non-financial companies (β = –0.058), and investments (β = –0.202). The results indicate that energy tax policies in European Union countries are primarily influenced by incentives related to economic growth, specifically energy consumption (β = 0.389), renewable energy (β = 0.076), trade openness (β = 0.544), and the level of public debt (β = 0.234). The results show that environmental motives are not yet a significant factor in the decision-making to increase energy tax rates. The findings indicate that when determining energy tax rates, national governments must carefully consider the balance between environmental motives and the potential consequences for the financial performance of non-financial corporations and their investments, especially in countries with energy-intensive industries.