ENVIRONMENTAL TAXES AS AN INSTRUMENT FOR REDUCING GREENHOUSE GAS EMISSIONS

Climate change is one of today's biggest problems, and the leading cause is excessive greenhouse gas emissions. To solve this problem, governments worldwide use various instruments such as setting standards in production or encouraging the production of energy from renewable sources. Environmental taxes are one of the most effective instruments in reducing greenhouse gas emissions and combating climate change. They are taking as a tax base the physical unit of something that has a proven, specific negative impact on the environment. They should encourage energy savings, motivate companies to invest in sustainable projects, discourage pollution, and generate additional revenue for the state. The great advantage of environmental taxes is that they directly correct market failures by including external costs in products and services' prices. Although these taxes also have certain disadvantages, such as a regressive effect, if they "properly" implemented, the benefits can be much greater than their weaknesses. There are differences among countries in environmental tax rates. Such differences are not desirable because international harmonization of environmental taxes is a prerequisite for an effective fight against excess greenhouse gas emissions. As long as there are significant differences in tax rates between countries, there is also the potential for pollution as companies will leave countries with a high tax burden in the environmental tax segment and relocate their plants to countries with a lower tax burden. This paper aims to show what impact environmental taxes can have on the amount of greenhouse gas emissions and the efficiency of the tax system. The paper confirms the hypothesis that higher environmental taxes reduce greenhouse gas emissions. Namely, environmental taxes increase the price of greenhouse gas emissions and thus discourage pollution. The analysis of comparable countries found that countries with a more pronounced share of environmental taxes in the tax system have relatively lower greenhouse gas emissions. In addition to environmental benefits, these taxes can be fiscally generous. Therefore, the paper shows how the introduction of environmental taxes while reducing direct taxes could contribute to the country's tax system's efficiency.