Green Fiscal Policy through Natural Resource Taxation - The Case of the European Union and Bosnia and Herzegovina

Abstract

The European Green Deal and the Sofia Declaration on the Green Agenda for the Western Balkans emphasise sustainable natural resource management, biodiversity conservation, and the transition to a circular economy as central priorities in pursuing climate neutrality. The main objective is to improve management practices and prevent the overexploitation of natural resources while recognising the critical importance of ecosystem services. This priority is equally relevant for Bosnia and Herzegovina, considering its rich yet vulnerable natural capital, high dependence on natural resources for economic activities, and the need to align with EU environmental standards and sustainable development goals as part of its EU integration process. Across Europe, market-based policy instruments reinforcing the polluter-pays principle, such as environmental taxes, particularly resource taxes, have become increasingly favoured as tools for pollution control and natural resource management. This paper explores the relationship between resource taxes and resource productivity within the green and circular economy context, focusing on the EU member states and Bosnia and Herzegovina from 2014 to 2023. Using a panel dataset and static panel regression models - including pooled Ordinary Least Squares (OLS), Fixed Effects (FE), and Random Effects (RE) - the study examines whether fiscal instruments, especially resource taxes, are associated with improvements in resource productivity and progress toward EU environmental performance targets. The expected findings will provide empirical insights into the role of fiscal policy in supporting the green transition and identify potential pathways for Bosnia and Herzegovina to fulfil its commitments under the Sofia Declaration for the Western Balkans, the European Green Deal, and relevant national strategies.