Broad Fiscal Burden in Asian Energy-Transition Contexts: How Development Levels Condition Growth

<p>Asian economies face the challenge of reducing emissions while sustaining economic growth, yet thegrowth implications of environmental taxation remain uncertain. This study examines whetherbroad tax burden and energy-system conditions are associated with economic growth in Asia,whether the tax-growth relationship varies by development level, and whether renewable-energycontext is more closely related to growth or environmental performance. Using an unbalancedcountry-year panel of 20 Asian economies from 1972 to 2024, the analysis applies fixed-effectsregressions with country and year effects and country-clustered standard errors. Because directenergy-tax measures are unavailable, tax revenue as a share of gross domestic product (GDP) isused as a broad fiscal proxy. The baseline model shows no statistically significant relationshipbetween tax revenue and real gross domestic product per capita growth, while the estimatedcoefficient is small and negative. Income-group models suggest heterogeneity around this weakaverage association: the tax-growth relationship is negative for lower-middle-income economiesbut positive for upper-middle-income and high-income economies. Renewable-energy share doesnot significantly moderate the tax-growth relationship, but it is strongly associated with lowercarbon intensity of output. These findings indicate that taxation’s growth associations depend ondevelopment level and not uniform across Asia, while environmental performance is more clearlylinked to energy-system structure than to tax revenue alone. Policy should therefore avoid stand-alone tax instruments, pair fiscal reform with revenue recycling and household protection, andexpand renewable-energy infrastructure.</p>