Balancing Debt, Growth, and Sustainability: The Role of Environmental Taxation

Abstract

Many economies face increasing pressures to reconcile debt sustainability with long-term growth under persistent debt and inflation. This study evaluates environmental taxation as a dual policy instrument. Results show that resources environmental taxes strengthen debt sustainability, and promote economic complexity, thereby supporting resilient development. Integrating green taxation into environmental strategies enhances macroeconomic stability, facilitates structural transformation, and advances low-carbon transitions. The findings highlight environmental-based taxation as a practical tool for aligning fiscal and environmental objectives, offering policymakers in selected countries a pathway to sustainable growth while safeguarding public finances.