The Impact of Decarbonization Tax on Economic Growth - Evidence for Western Balkan Countries

Decarbonization and carbon tax have become increasingly relevant in recent years, due to the economic implications in industry, and especially in the energy sector.Naturally, the implementation of decarbonization policies in Western Balkans countries is a necessity for mitigating the environmental crisis in the region.This study examines the impact of carbon tax on economic growth in Western Balkan countries including Croatia.Our research is a quantitative empirical study based on regression model.Panel data on empirical study is based on 91 years of observation of Western Balkan countries, each of these countries has a 13-year observation.Data includes two sets of variables and examines the panel data obtained from World Bank Open Data over the period 2010-2022.The results indicate a significant impact of CO2 emission tax on economic growth in Western Balkan countries.The result shows that CO2 emission tax and economic growth are negatively correlated with each other.The results indicate a significant impact of CO2 emission tax on economic growth in Western Balkan countries.A percentage CO2 emission tax, causes a 2.52 decrease in economic growth under ceteris paribus average.CO2 emission tax, FDI, GDP growth and unemployment rate indicate an inelastic relationship.The highest negative impact is shown in the state of Kosova, followed by Serbia and Bosnia and Herzegovina.The high negative impact on these countries is due to their high reliance on coal in energy production.