Better Environmental Tax Regulations, better Structural Change and Innovation: Evidence from CFA Franc countries along Africa’s green industrialization outlook

Although evidence on the impact of green fiscal regulations in African countries remains underexplored, this paper breaks new ground by empirically investigating the relationship between environmental tax policies and structural change path. The study exploits a sample of selected countries that use CFA Franc currency with data spanning the period 2000–2019 and uses manufacturing value added and, alternatively, industry value added as indicators to capture structural change. Ordinary Least Squares in baseline estimations as well as Driscoll and Kraay standard errors, Fully Modified Ordinary Least Squares, Panel Corrected Standard Error, Two Stage Least-Squares, Three Stage Least-Squares Instrumental Variable and Quantile Analysis are employed for robustness checks. The results provide empirical evidence for a stronger positive effect of environmental taxes on structural transformation in African CFA Franc countries. To conclude, the paper has several policy implications and perspectives.