The new edition of IPF Notes, authored by Leonarda Srdelić, features the analysis of trends in revenues from environmental taxes in Croatia and the European Union, which recorded an increase from EUR 0.6 billion in 1995 to EUR 2.3 billion in 2022, growing at an average annual rate of 5.8%. The majority of this growth has been generated by taxes on energy products, while taxes on transport, pollution and natural resources contribute to only a smaller share. With its 3.3%, Croatia's share of revenues from environmental taxes in GDP is one of the highest shares in the EU, exceeded only by Greece and Bulgaria. Trends also show that the share of revenues from environmental taxes in GDP in Croatia is growing on average, whereas at the EU level it is generally decreasing.
Environmental taxes are EU’s key fiscal instrument directed at products and activities with a negative impact on the environment, whose objective is to alter production and consumption patterns that are harmful to the environment by promoting economically efficient practices and generating income for financing green projects. In addition, taxes are an important source of funding for green projects that are aligned with the objectives of the European Green Deal, including the reduction of greenhouse gas emissions by 55% by the year 2030 and reaching climate neutrality by 2050.

A high share of revenues from environmental taxes in GDP, especially those related to energy products, implies continued dependence on fossil fuels and suggests that measures for promoting energy efficiency and transition to renewable energy sources have not been implemented as successfully as compared to other EU members. To further illustrate this dynamics, it is interesting to monitor the intensity of CO₂ emissions, which is a measure of the amount of CO₂ emitted per unit of generated energy. This indicator signals the share of energy generated from fossil fuels in the total amount of generated energy. Fluctuations in the intensity of CO₂ emissions signal that the demand for fossil fuels in the observed period was not related to fiscal policy but rather primarily depended on levels of economic activity. Conversely, the Eurozone shows a stable trend of reducing CO₂ emissions per unit of produced energy, which implies a more successful implementation of policies aimed at increasing energy efficiency and more widespread use of renewable energy sources. This fact leads Srdelić to the conclusion that measures for promoting energy efficiency and transition to renewable energy sources have not been implemented in Croatia to the desired levels of efficiency or range compared to the EU average.

One of the key tools for countries such as Croatia, showing fluctuations in CO₂ emissions that are closely related to economic activity, would be the introduction of carbon tax. Revenues generated through this tax can be reinvested in green projects or used for enhancing infrastructure and developing technologies that are less reliant on fossil fuels.
The author concludes that introducing and enhancing fiscal measures in a thought-out manner would enable Croatia to respond to climate-related challenges and energy transition needs more efficiently as well as to meet its commitment of reducing greenhouse gas emission by 55% by the year 2030 and reaching climate neutrality by 2050.

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