Exploring the nexus between environmental taxation, air pollution, and health outcomes in emerging and non-emerging EU countries: a space-time perspective.

Introduction: The study analyzed the relationship between environmental taxation, air pollution, and health effects in EU member states using an integrated spatial-temporal approach that captures both internal and cross-country effects, with a comparative focus on emerging and non-emerging EU economies. Methods: To account for fully flexible spatial spillovers, following the recommendation of J. P. Elhorst, we estimate and compare the dynamic spatial panel SLX (Spatially Lagged X), which incorporates the spatial lag in the independent variables, and SDM (Spatial Durbin Model), the model which combines spatial lags of both the dependent and independent variables. Results: Pollution and resource taxes are the environmental tax instruments with the strongest impact on reducing air pollution. Their effects are observed not only at the national level, but also in neighboring countries, suggesting the presence of significant spatial spillovers. By contrast, energy and transport taxes have limited or no effect on air pollution because transport demand is relatively inelastic and greener alternatives remain limited. The analysis also confirms a persistent relationship between air pollution and adverse health outcomes, positive, statistically significant direct effects were identified for: greenhouse gases, acidifying gases, and ozone precursors on cardiovascular disease deaths; greenhouse gases, acidifying gases, and PM2.5 on respiratory disease deaths. When comparing the direct and indirect spatial effects in the EU emerging economies (Romania, Bulgaria, Hungary, and Poland) with the rest of EU countries, in both the case of taxes effects on pollution as well as pollution effects on health, the differences between the two groups arise from domestic effects rather than cross-border spillovers, which appear comparable in the EU, the only exception being the case of greenhouse gases effects on cardiovascular mortality, where we find evidence of significant differences between the emerging and non-emerging spatial spillovers. Discussion: The results highlight the importance of developing differentiated policies at the European Union level and support the need for coordination of environmental policies, given the transboundary nature of pollution and the spatial effects across states.