THE EFFICIENCY OF ENVIRONMENTAL POLICY: EMPIRICAL EVIDENCE BASED ON THE APPLICATION OF VEC MODEL
Keywords:CO2, carbon price, Czech Republic, VEC model, environmental policy instruments
This paper considers the relationship between CO2 as the main variable of climate change and environmental policy instruments covering environmental taxes and government spending on environmental protection. By these, the effects of the gross domestic product, carbon price, final energy consumption and quality of air were considered using the Vector Error Correction Model. The analysis is based on the survey of environmental policy instruments in the Czech Republic using time series data over the period 1996-2012. The data are extracted from the Eurostat database. The research performed identified negative relationships between CO2 and government spending on environmental protection and between CO2 and carbon price. Furthermore, the research revealed that the government spending on environmental protection and the carbon price has a stronger effect on CO2 than environmental taxes in the Czech Republic. This implies that environmental taxation is mainly used as a source for raising budget revenues in the Czech Republic without any effect on the level of consumption of goods producing CO2 emissions. Therefore, it can be concluded that currently imposed environmental taxation is inefficient.