Effects of fiscal policies on water pollution from chemical and oil industries in selective OPEC countries

Document Type : Original Article


1 Department of Economics, Faculty of Economics, University of Shahid Beheshti, Tehran, Iran

2 Department of Economics, Faculty of Economics, University of Tehran, Tehran, Iran


The chemical and oil industries are effective factors on the development of OPEC countries and their economies are dependent on exports of these industries. The main aim of many countries is for higher economic growth which leads to more environmental pollution, and so we should survey effects of fiscal policies (value added tax) on environmental pollution. The aim of this paper is to survey the relationship between value added tax and water pollution from chemical and oil industries. 
Materials and methods:
In this paper, we wish to survey changes in value added tax as an efficient form of taxation of oil and chemical commodities and services exports and in the GDP of selected OPEC countries and its impact on water pollution caused by the oil and chemical industries. Theoretically, a higher tax rate on the value added of chemical industries leads to a decline pollution. Therefore decreased water pollution causes a decline in industry value added and decrease of GDP. With exports increasing, we can expect that, due to greater production, we will have more pollution in the oil and chemical industries. A panel data model is used for 2000-2013 and variables such as export of chemical and oil industries and GDP are regressed. The panel model is worked with time series data for two or more crosses. For using this method, we should survey stationary variables and, then, we should survey the cointegration between variables. When variables are stationary and cointegrated, it means that there is a long standing relationship between variables and we can estimate the relations between them. After that, we use F-Limer to test that the model is panel and the Husman test to survey whether we have a fixed or random effect. After all of these tests, we can use from panel model to estimate and extract the coefficients and R2 of the model. In our model, all of variables are meaningful and the R2 is 0.87.
Results and disscussion:
Results of the model demonstrated that, in the selected OPEC countries in our estimation period, with one unit increase in the tax rate of these countries, water pollution from the oil and chemical industries decreased by 0.3. With one unit increase in these countries’ exports (oil and gas exports as a percentage of GDP), water pollution from the oil and chemical industries increased by 0.03 unit with a one unit increase in GDP of these countries, increasing in pollution of oil and chemical industries, so low. Therefore effect of GDP on water pollution of oil and chemical industries of these selective OPEC countries is very small and we can say that GDP does not affect water pollution from the oil and chemical industries in our period and in our selected countries.
Results reveal that in these countries, there is a negative relation between value added tax rate and water pollution. According to the estimation of results, the best condition for these countries is an increase in the rate of tax on value added of the chemical and oil industries but, in the real world because of high competition between OPEC countries and the tendency of these countries towards more oil exports, in these countries the main aim is more production. Therefore, in OPEC countries, the negative relationship between tax on value added and pollution of water from oil and chemical industries is only because OPEC countries are so state-oriented. 


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