From Green Policies to Clear Skies: Institutional Pathways of EU Environmental Policy Effectiveness

¹ Finance, Business Information Systems and Modelling Department, Faculty of Economics and Business Administration, West University of Timisoara, Bvd Vasile Pârvan, No. 4, 300223, Timisoara, Romania.
² *Doctoral School of Economics and Business Administration and East-European Centre for Research in Economics and Business, West University of Timisoara, Bvd Vasile Pârvan, No. 4, 300223, Timisoara, Romania.
³ Faculty of Economics and Business Administration, Master’s Program Organizational Governance and Fiscal Consulting, West University of Timisoara, Bvd Vasile Pârvan, No. 4, 300223, Timisoara, Romania
⁴ Faculty of International Business, The University of Danang - University of Economics, Danang City, Vietnam
⁵ Finance, Business Information Systems and Modelling Department, Faculty of Economics and Business Administration, West University of Timisoara, Bvd Vasile Pârvan, No. 4, 300223, Timisoara, Timis County, Romania.

^* Corresponding author: This email address is being protected from spambots. You need JavaScript enabled to view it.

Abstract

The role of institutional and economic mechanisms in amplifying the effects of environmental policies is critical for high environmental performance in the European Union. This study examines the complex relationships among environmental taxation (per capita environmental taxes), its mediating mechanisms (Government effectiveness and Regulatory quality), and the amplifying effect of economic capacity (GDP per capita and Gross Fixed Capital Formation) on environmental outcomes (per capita CO? emissions). We employ a two-pronged methodological approach: a mediation analysis to identify indirect causal pathways linking environmental taxation to emissions via governance quality, and a Multilayer Perceptron model to capture complex, non-linear interdependencies among fiscal, institutional, and economic variables. The results indicate that environmental taxation reduces CO? emissions per capita primarily through indirect effects mediated by government effectiveness and regulatory quality, while economic capacity significantly amplifies these relationships. This methodological shift allows for a mechanism-focused understanding of policy effectiveness, complementing previous configurational insights and providing actionable guidance for EU policymakers.