Environmental Tax, Environmental Related Grant, and Corruption: The Implications for Green Growth and Natural Resource Management in Sub-Saharan Africa

Abstract

This thesis investigates the complex relationship between environmental taxation, corruption, and environmental-related grants in sub-Saharan Africa, focusing on natural resource depletion and green growth. The first study examines the moderating role of corruption in the relationship between environmental tax and natural resource depletion, employing multiple econometric methods. Findings reveal that while environmental taxes increase resource depletion, corruption control reduces depletion. Key control variables, such as energy use and urbanisation, also significantly affect depletion, underscoring the importance of corruption control in enhancing environmental tax effectiveness. The second paper examines how environmental taxes and corruption affect green growth across different quantiles, using the Method of Moments Quantile Regression (MMQR) on 15 countries from 2000 to 2020. Results show that the moderating effect of corruption becomes more significant at higher quantiles of green growth, with the strongest impact observed at the 9th quantile. This suggests that environmental taxes are more effective in promoting green growth in countries with stronger corruption control. The findings emphasise the need for tailored environmental tax policies based on the corruption level of individual countries. The third paper investigates the combined impact of environmental taxes and environment-related grants on green growth using an autoregressive distributed lag (ARDL) model and MMQR analysis. Results indicate that environmental taxes alone do not significantly impact green growth. However, the interaction between environmental taxes and grants significantly enhances CO2 productivity. It reduces energy intensity, highlighting the value of a mixed policy approach that integrates economic incentives with capacity-building support. The thesis makes several significant contributions to the understanding of environmental policy effectiveness in sub-Saharan Africa, both empirically and theoretically. It advances the literature by elucidating the nuanced role of corruption as a moderating factor in the relationship between environmental taxation and natural resource depletion, highlighting that while environmental taxes alone may inadvertently increase resource use, effective corruption control can mitigate this adverse effect. This finding enriches the theoretical discourse on environmental governance accounting and environmental economics by emphasizing the importance of institutional quality in policy outcomes. The second study extends this understanding by demonstrating that the efficacy of environmental taxes in promoting green growth varies across different levels of development, with corruption control becoming increasingly critical at higher green growth quantiles. This suggests a threshold effect and underscores the need for context-specific policy design, contributing to the literature on asymmetric effects and policy tailoring. The third paper broadens the theoretical framework by illustrating that, environmental taxes, when complemented with environment-related grants, can synergistically enhance green productivity, emphasizing the importance of integrated policy mixes. Collectively, these studies contribute to the theoretical understanding of how institutional factors, such as corruption, interact with fiscal instruments and grants to influence environmental and economic outcomes. They also provide a nuanced perspective that highlights the importance of context-dependent policy approaches, thus enriching both the environmental economics and development policy literatures. Based on the findings, this thesis recommends adopting a context-specific approach to environmental taxation, considering each country's environmental grants and corruption levels. Policymakers in countries with low corruption should leverage higher environmental taxes to drive green growth, while those in high corruption settings should prioritise corruption control before implementing aggressive tax policies. Furthermore, the study highlights the importance of combining environmental taxes with grants to maximise their effectiveness. Regional governments are encouraged to adopt mixed policy frameworks integrating fiscal instruments with technical assistance to promote green growth and natural resources. These strategies will be critical for achieving long-term environmental sustainability and economic growth in sub-Saharan Africa.