The impact of environmental taxes on innovation is a complex and debated topic. This research aims to investigate the effect of environmental taxes, as a market-based instrument for internalizing external costs, on innovation in selected provinces of Iran within the framework of the Porter Hypothesis. The main research question is whether environmental taxes stimulate innovation or have a deterrent effect on it. To this end, data from 15 selected provinces of Iran were collected for the period 1385 to 1401 (2006-2022) and analyzed using the Quantile Panel Regression model. The innovation index was considered based on research and development expenditures. The effect of green taxes was examined alongside variables such as the value added of industrial workshops, gross fixed capital formation, employment of university-educated labor, and export capacity of industries. The research findings indicate that industrial value added, gross fixed capital formation, educated human resource employment, and export capacity have a positive and significant effect on innovation. Conversely, environmental taxes had a negative and significant effect on the innovation index across all quantiles, thus the Porter Hypothesis is not confirmed in the studied provinces. These results suggest that the cost pressure from environmental taxes, financial resource constraints, and the lack of complementary supportive policies have led to a decline in innovation by reducing investment in research and development. Finally, it is recommended that a portion of the revenues generated from environmental taxes be redistributed in the form of R&D incentives, subsidies for clean technologies, and financial facilities. Furthermore, the design of these policies should be tailored to the industrial structure and innovation capacity of the regions to transform deterrent effects into positive impacts.
Habibizad, H., Zare, H., & Ebrahimi, M. (2026). Environmental taxation: stimulus or hindrance to innovation? porter hypothesis test in the major provinces of energy consumption in Iran. Public Sector Economics Studies, 5(2), -. doi: 10.22126/pse.2026.13705.1250
MLA
Habib Habibizad; Hashem Zare; Mehrzad Ebrahimi. "Environmental taxation: stimulus or hindrance to innovation? porter hypothesis test in the major provinces of energy consumption in Iran". Public Sector Economics Studies, 5, 2, 2026, -. doi: 10.22126/pse.2026.13705.1250
HARVARD
Habibizad, H., Zare, H., Ebrahimi, M. (2026). 'Environmental taxation: stimulus or hindrance to innovation? porter hypothesis test in the major provinces of energy consumption in Iran', Public Sector Economics Studies, 5(2), pp. -. doi: 10.22126/pse.2026.13705.1250
VANCOUVER
Habibizad, H., Zare, H., Ebrahimi, M. Environmental taxation: stimulus or hindrance to innovation? porter hypothesis test in the major provinces of energy consumption in Iran. Public Sector Economics Studies, 2026; 5(2): -. doi: 10.22126/pse.2026.13705.1250
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