Environmental Taxation and Green Innovation Policies

Environmental taxation harnesses fiscal instruments to internalise the external costs of pollution and resource depletion, creating a market signal that encourages firms and households to adopt cleaner technologies and behaviours. By levying taxes on emissions, resource extraction or waste generation, governments generate revenue that can be channelled into research and development, subsidies for renewable energy or support for low-carbon infrastructure. This approach is grounded in the so-called Porter hypothesis, which posits that well-designed environmental regulations can stimulate innovation and boost competitiveness. In practice, environmental taxes range from carbon levies in Europe to resource and land-use taxes in Asia, each calibrated to local economic and ecological contexts. Evidence shows that taxation mechanisms can accelerate industrial upgrading, promote green patenting and encourage corporate adoption of sustainable practices, while also yielding health and climate co-benefits. The global diffusion of these policies reflects growing consensus on the need for integrated fiscal and innovation strategies to achieve net-zero targets and sustainable development goals.

Research from Nature Portfolio

No recent Nature Portfolio content available.

Environmental Taxation and Green Innovation Policies publication trend

The graph below shows the total number of articles in environmental taxation and green innovation policies across all publications each year (not limited to Nature Index journals).

Technical terms

Environmental tax: tax levied on activities or products that generate environmental externalities, aimed at internalising social costs and incentivising greener practices.

Green technology innovation: development and application of novel processes, products or services that reduce environmental impacts or conserve resources.

ESG performance: evaluation of a firm’s environmental, social and governance practices, reflecting its sustainability commitments and risk management.

Green total factor productivity: measure of industrial efficiency that accounts for environmental inputs and outputs, indicating the sustainability of production growth.

References

1. The effects of environmental tax reform on urban air pollution: A quasi-natural experiment based on the Environmental Protection Tax Law. Frontiers in Public Health (2022).
2. Environmental protection tax, corporate ESG performance, and green technological innovation. Frontiers in Environmental Science (2022).
3. Study on the Impact of Environmental Tax on Industrial Green Transformation. International Journal of Environmental Research and Public Health (2022).