Does environmental tax support the generation of renewable energy?

Environmental tax is a very important financial instrument introduced to support environmental policy. These instruments cover a wide range of areas such as energy, transportation and pollution management. Due to its scope, it can have great significance in terms of sustainable development and the environment. Especially, environmental taxes play an important role in promoting renewable energy production which is crucial in order to achieve sustainable development goals and to build a carbon neutral system. Although the use of fossil fuels play a large part in the production and consumption cycle, it is estimated to decrease in the future thanks to financial practices such as the carbon tax. For this reason, today, many nations, especially industrialized countries, apply for environmental taxes so as to achieve sustainable development goals and increase the use of renewable energy. In this context, the study investigated whether environmental taxes support the production of renewable energy. In order for the research question to be analysed, the selected country group is the European Union (EU). The European Union, with its production infrastructure, have been dominant in the use of fossil fuels causing global warming since the industrial revolution. However, in recent years, the EU have been turning to renewable energy sources, especially for electricity production, with policy preferences to combat climate change and reduce carbon emissions. As a methodology for the analysis, part of this study applied dynamic panel data analysis. Material data on environmental taxes were obtained from the "OECD" database, and data on electricity generation from renewable energy were obtained from "Our World in Data". This study investigated the effects of total environmental taxes, other types of environmental taxes and renewable electricity generation for selected twenty five EU countries. As a result of the analysis it was determined that environmental tax leads to an increase in renewable electricity generation. However, it was found that there was no positive relationship between resources tax, pollution tax and renewable electricity energy generation.