Market Instruments for a Sustainable Economy: Environmental Fiscal Policy and Manifest Divergences

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Abstract
The introduction of environmental taxation policies had reached most European countries by the late 1990s. The pricing of activities considered harmful to the environment has given rise to the design of various economic instruments, such as environmental taxes, aimed at promoting environmental responsibility and at enabling the Kyoto Protocol targets to be met, and at the same time generating a marked increase in tax revenues. The aim of this article is to examine whether convergence in environmental taxation has taken place among 27 EU countries, doing so by analyzing time series and applying unit root tests. Our findings show there has been no such convergence, overall, despite the existence of groups of countries with common patterns of behavior.

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