EU Environmental Tax Revenue Climbs, But Declines in Fiscal Share Continue

Environmental tax revenue in the European Union reached €341.5 billion in 2023, according to data released Wednesday by Eurostat, marking a 2.1 per cent increase from the €334.6 billion recorded the previous year. The €6.9 billion rise in annual revenue reflects ongoing collection efforts, yet the broader fiscal significance of environmental taxes continues to decline across the bloc.

Despite this upward movement in absolute terms, environmental taxes are accounting for a shrinking proportion of both GDP and total government revenue. Back in 2010, such taxes represented 2.4 per cent of EU GDP. By 2023, that figure had dropped to 2.0 per cent. A similar trend can be observed in their share of total tax and social contribution revenues, which decreased from 6.3 per cent in 2010 to 5.1 per cent in 2023. “These figures underline a structural shift in the role of environmental taxation in the EU’s overall fiscal framework,” Eurostat stated in its accompanying commentary.

When broken down by contributor, corporations were the largest source of environmental tax revenue in 2023, accounting for 49.4 per cent of the total. Within that group, companies in the manufacturing, construction, mining, and utilities sectors contributed 23.6 per cent, while those in the services sector were responsible for 25.8 per cent. Meanwhile, households closely followed with a 48.3 per cent share of environmental tax payments, underscoring the broad base of such taxation across the population.

In 15 EU member states, households paid more than 40 per cent of total environmental taxes, with the proportion ranging from 41.5 per cent in Hungary to 60.3 per cent in Ireland, where household contributions were the highest among all member states.

At the national level, corporate contributions made up around half of environmental tax revenues in most EU countries. The highest shares were reported in Czechia at 81.2 per cent, Estonia at 80.3 per cent, and Romania at 79.1 per cent. On the opposite end, Austria recorded the lowest corporate share at 33.6 per cent, followed by Luxembourg at 34.9 per cent and Ireland at 38.0 per cent.

While non-residents typically play a minimal role in environmental tax revenues across the EU, there are notable exceptions. In Luxembourg, non-residents contributed a substantial 48.7 per cent of the total, followed by Malta with 17.4 per cent and Austria with 14.1 per cent.

Eurostat’s findings provide a detailed look at how environmental taxation is evolving across the EU, amid continued efforts to align fiscal strategies with climate goals. As the structure of environmental taxation shifts, policymakers are confronted with the dual challenge of ensuring sustainable revenues while driving forward environmental objectives.

By fLEXI tEAM