Green Fiscal Stance and Climate Pressure in Advanced Europe: Evidence From a Multidimensional Climate Index

ABSTRACT The primary objective of this study is to present new findings on the effects of green fiscal policy instruments on climate pressure in EU‐15 countries. To this end, environmental taxes and the environmental policy stringency indicator are jointly evaluated within the same empirical framework using a panel data set covering the period 1995–2019. To avoid limiting climate pressure to single indicators, a multidimensional climate pressure index derived using PCA is used. The analysis is based on the MMQR approach, assuming that the effects may vary across the distribution, and the robustness of the findings is tested using Driscoll–Kraay standard errors. The Dumitrescu–Hurlin panel causality test is then applied. The results show that environmental policy stringency, environmental taxes, and the share of renewable electricity production statistically significantly reduce climate pressure across most quantiles, while growth increases climate pressure. The findings suggest that, in the EU‐15 context, both environmental policy stringency and environmental taxation, together with energy transition channels, play an important role in reducing climate pressure, offering important implications for green fiscal policy design.