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Vol. 44 No. 79 (2025)

Economic policy

Tax Incentives for Environmental Investments in Colombian Industry

https://doi.org/10.19053/uptc.01203053.v44.n79.2025.17739

Published 2025-03-12

  • Martha Yanez-Contreras
    • ,
  • Haroldo Rodriguez-Paez
    • ,
  • Hector Mendoza-Guardo

Martha Yanez-Contreras
University of Cartagena image/svg+xml

Haroldo Rodriguez-Paez
Universidade Federal de Pernambuco image/svg+xml

Hector Mendoza-Guardo
University of Cartagena image/svg+xml

Abstract

Colombia faces significant environmental challenges because of climate change, which could lead to serious disasters such as heat waves, storms and droughts, affecting the availability of drinking water and food security, in addition to reducing GDP and exacerbating poverty and inequality. Faced with this scenario, the country has implemented policies aimed at promoting more sustainable business practices. This article aims to analyze the impact of tax incentives on the environmental investment of industrial firms in Colombia, using data from the Environmental Industrial Survey (EAI) and the Annual Manufacturing Survey (EAM) between 2014 and 2019. The Propensity Score Matching technique was used to estimate the impact of tax incentives on environmental investment and the Blinder-Oaxaca decomposition was used to estimate the investment gap. The results consistently suggest that establishments that received tax benefits, on average, make a higher environmental investment than those that did not receive these incentives. Additionally, it was found that firms that made environmental investments were also those that generated the most waste. These findings highlight the effectiveness of tax policies in encouraging environmental investment, although they underscore the need for rigorous monitoring of possible secondary effects on the fulfillment of sustainable objectives.

Keywords

Taxation, Investment, Environment, Evaluation, Industry, Colombia

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