Asymmetric and cross-country effects of environmental taxes on economic growth: evidence from benelux and baltic economies

Environmental taxation has emerged as a critical instrument for balancing economic growth with climate objectives, yet its effectiveness varies considerably across regions. This study investigates the asymmetric and cross-country heterogeneous effects of dis-aggregated environmental tax components (energy, transport, pollution, and resource taxes) on economic growth in the Benelux (Belgium, Netherlands, Luxembourg) and Baltic (Estonia, Latvia, Lithuania) economies over 2013–2022. We employ a panel PMG-NARDL model to identify long-run and short-run asymmetries between positive and negative shocks in environmental taxation. The results reveal significant asymmetric effects: positive shocks in energy, transport, and resource taxes enhance GDP growth, while pollution tax increases exert negative short-run effects. Notably, Baltic economies exhibit substantially higher sensitivity and larger elasticities compared to Benelux countries, reflecting differences in economic structure, energy intensity, and institutional maturity. These findings provide empirical support for the double-dividend hypothesis and asymmetric adjustment theory, demonstrating that environmental taxation can yield both environmental and economic benefits when appropriately designed. Policy implications emphasize the necessity of differentiated environmental tax architectures, enhanced revenue recycling mechanisms, and region-specific institutional reforms to maximize growth-compatible environmental transitions within the European Union.