Faculty of Economics, University of Niš 11-12 October 2017 International Scientific Conference CONTEMPORARY APPROACHES IN THE ANALYSIS OF ECONOMIC PERFORMANCES 197 ENVIRONMENTAL TAXES AND EXPENDITURES IN SELECTED COUNTRIES: PANEL DATA ANALYSIS Jadranka urović Todorović * Marina Djordjević • Miloš Stojanović ♦ Abstract: The aim of this paper is to analyze the link between revenues from environmental taxes and government environmental expenditure in 8 European countries. By implementing a panel data analysis on a defined sample, we come to the conclusion that there is a positive link between the government expenditure in the field of environmental protection and revenues from environmental taxes. The obtained results indicate that this link is strong. Increase in environmental tax revenues by 1% has an impact on the increase in government environmental expenditures by 0.99%. In order to make the development sustainable, it is necessary that in the observed countries the growth of these expenditures be faster than the growth of revenues from environmental taxes. Keywords: environmental taxes, environmental expenditures, panel data analysis. 1. Introduction From the moment when sustainable development became a key component of the development strategy of almost all countries of the world, the care of the healthy environment was gaining in importance. Thus changed the role of individual instruments in the field of environmental protection. The command and controlling instruments, which had a dominant role for many years, proved to be insufficiently effective in solving accumulated environmental problems, which had the effect that since the 1970s market- based instruments were increasingly being applied. Two important instruments which are used today in solving environmental problems are environmental taxes and pollution permits. Environmental taxes are * Faculty of economics, University of Niš, Serbia,  jadranka.djurovic@eknfak.ni.ac.rs • Faculty of economics, University of Niš, Serbia,  marina.dj@ptt.rs ♦ PhD student, Faculty of economics, University of Niš, Serbia  milos.s87@hotmail.com UDC 504.05/.06:336.226