The impact of environmental taxation on sustainable economic development in Nigeria: A study of Lagos State (2000–2020).
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Background of the Study:
Environmental taxation has emerged as a critical policy tool aimed at mitigating environmental degradation while promoting sustainable economic development. In Lagos State—a major industrial and economic center—environmental taxes were introduced to internalize the external costs of pollution and resource depletion (Afolabi, 2023). The policy framework sought to incentivize companies to adopt cleaner production methods, thereby aligning economic activities with environmental sustainability. Revenue from these taxes was earmarked for green initiatives, improved waste management, and investments in renewable energy, addressing the dual challenges of industrial growth and environmental conservation (Balogun, 2024). However, while some studies suggest improved environmental quality following tax implementation, debates persist regarding its broader economic impact (Chinwe, 2025). The dynamic interplay between environmental protection and economic development has prompted a critical evaluation of whether these taxes have successfully balanced growth with sustainability. This study examines the effectiveness of environmental taxation in promoting sustainable development in Lagos State, while analyzing the trade-offs and policy implications for a green economy.
Statement of the Problem:
Despite the promising objectives of environmental taxation, Lagos State faces challenges in reconciling economic growth with environmental sustainability. The imposition of such taxes has sometimes increased operational costs for industries, affecting their competitiveness (Afolabi, 2023). Moreover, questions remain about the transparency and effectiveness of revenue allocation for environmental initiatives (Balogun, 2024). This regulatory framework, therefore, creates a dilemma where the dual goals of fostering a sustainable environment and maintaining economic momentum may conflict (Chinwe, 2025). The study seeks to identify these challenges and assess whether environmental taxation effectively balances the imperatives of economic development with ecological preservation.
Objectives of the Study:
• To evaluate the effectiveness of environmental taxation in promoting sustainable economic development.
• To assess the impact of environmental taxes on industrial competitiveness in Lagos State.
• To recommend policy adjustments for optimizing the balance between economic growth and environmental sustainability.
Research Questions:
• How does environmental taxation affect industrial performance in Lagos State?
• What are the key factors influencing the effectiveness of environmental taxes in achieving sustainability?
• How can environmental tax policies be optimized to support both economic growth and environmental protection?
Research Hypotheses:
• H1: Environmental taxation contributes positively to sustainable economic development.
• H2: Increased environmental tax burdens negatively affect industrial competitiveness.
• H3: Policy adjustments can enhance the dual benefits of environmental taxation.
Significance of the Study:
This study critically examines the balance between economic development and environmental protection through taxation. Its findings offer essential insights for policymakers to refine tax policies that support sustainable growth without compromising industrial competitiveness (Afolabi, 2023; Balogun, 2024).
Scope and Limitations of the Study:
This study is limited to analyzing environmental taxation in Lagos State, focusing on its impact on sustainable economic development. It does not address taxation policies in other regions or on a global scale.
Definitions of Terms:
• Environmental Taxation: Taxes levied on environmentally harmful activities to mitigate ecological damage.
• Sustainable Economic Development: Growth that meets present needs without compromising future generations.
• Green Economy: An economic system aimed at reducing environmental risks and promoting sustainability.
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