The effect of environmental taxes on sustainable energy transition prospects

Purpose The transitioning to cleaner energy sources, such as renewables and improving energy efficiency, has been identified as an important objective of the UN Sustainable Development Goals (SDGs). This study aims to examine whether the imposition of environmental taxes can be a useful mechanism for countries to achieve the sustainable energy transition agenda. Design/methodology/approach A panel data of 88 countries covering the period of 1996–2021 was used for the empirical analysis. The method of moments quantile regression estimation technique was used to examine the non-linear and asymmetric relationships among the variables. Findings The empirical results demonstrate that environmental taxes significantly drive sustainable energy use within the sampled countries. Further analysis demonstrates that the observed relationship between environmental taxes and sustainable energy transition is more pronounced among high-, lower–middle- and low-income countries. However, environmental taxes do not seem to have a significant impact on sustainable energy use in upper–middle-income countries. Practical implications The findings of this study provide policymakers with important insight to rethink environmental taxation strategies and have implications, particularly for achieving the SDGs. Social implications The findings of this study provide an indication that the imposition of environmental taxes has important implications on the extent to which countries rely on cleaner energy sources to meet their energy demands. Originality/value This study offers valuable insights into the role of environmental taxes in promoting environmental sustainability, particularly through the lens of sustainable energy transition. By examining the global impact and conducting a breakdown by income level, this research provides a comprehensive understanding of the effectiveness of environmental taxes in achieving environmental goals.