Environmental tax and productivity in a decentralized context: new findings on the Porter hypothesis

This paper studies, for the first time, the effects of environmental taxes on efficiency gains and the growth of the regions. To this end, we have estimated a dynamic panel-data model to the context of the Spanish regions that reflects the effects of environmental taxation and regulation separately. The results provides further empirical evidence in favour of the Porter hypothesis, to the extent that a strict environmental policy implemented via green taxes rather than regulation may raise productivity, which may be because they drive organizational and technological change in firms seeking to reduce their tax payments.