“Multiple Dividends with Climate Change Policies: Evidence …
111
CO 2 E could be decomposed in scale, composition and intensity effects, and we also
considered them in the CGE model.
The 19 unknowns are: P 1 C 1 P 2 C 2 W π 1 π 2 L 1 L 2 U nK 1 K 2 Q 1 Q 2 L g M X K m CO 2 E.
Given this simplified model we will consider a double dividend when the ETR
allows reducing CO 2 E while GDP increases or at least does not fall. A third dividend
of the ETR will be added when the unemployment rate, Un, also falls and even a
poverty indicator, such as welfare of the poorest households improves. Finally, the
fourth dividend of the ETR would arise when exports, X, are not required to significantly increase as consequence of its implementation (e.g. to introduce a foreign
cleaner new technology of production); otherwise, the ETR could fail. Even though
most of exported goods are commodities a sudden increase of exports is unrealistic and thus, the lack of exports could put under stress the foreign reserves of the
economies, which is a recurrent problem in developing countries.
As evidenced by the literature, not only factor market assumptions (e.g. wages
determination and capital mobility) but also the initial tax structure of the economy,
could condition the role of carbon taxes in approaching Pareto optimality. For
instance, in this simplified model, a new ad-valorem tax (e.g. carbon tax) t 2 charged
on final demand for the good 2 could reduce losses due to distortions rather than
increase them (when t 2 = t 1 ).
5 See the rest of the model explanation with ETR in
subsection 2.1.
References
Aldy JE, Levy E, Parry I (2010) What is the role of carbon taxes in climate change mitigation?”
PREMnotes 2. Washington, DC, United States: World Bank. Available at: http://www1.worldb
ank.org/prem/PREMNotes/Note2_role_carbon_taxes.pdf
Allan G, Lecca P, McGregor P, Swales K (2014) The economic and environmental impact of a
carbon tax for Scotland: a computable general equilibrium analysis. Ecol Econ 100:40–50
Balineau G, de Melo J (2011) Stalemate at the negotiations on environmental goods and services
at the Doha Round. FERDI Document de Travail (28)
Bento AM, Jacobsen M (2007) Ricardian rents, environmental policy and the ‘double-dividend’
hypothesis. J Environ Econ Manage 53(1):17–31
Böhringer C, Carbone J, Rutherford TF (2016) Embodied carbon tariffs. Scandinavian J Econ
Bovenberg AL, Goulder LH (2002) Environmental taxation and regulation. In: Handbook of public
economics, vol 3, pp 1471–1545. Elsevier
Bovenberg AL, Van der Ploeg F (1994) Consequences of environmental tax reform for involuntary
unemployment and welfare. CentER Discussion Paper 1994
Brock W, Scott Taylor M (2004) Economic growth and the environment: a review of theory and
empirics. NBER Working Paper 10854. National Bureau of Economic Research, Cambridge,
United States
CAIT Climate Data Explorer (2015) World Resources Institute, Washington, DC. Available online
at: https://cait.wri.org
Carraro C, Galeotti M, Gallo M (1996) Environmental taxation and unemployment: some evidence
on the ‘double dividend hypothesis’ in Europe. J Public Econ 62(1–2):141–181
5 This would be a case of “double dividend” in the weak sense in terms of Zhang y Baranzini (2000).
111
CO 2 E could be decomposed in scale, composition and intensity effects, and we also
considered them in the CGE model.
The 19 unknowns are: P 1 C 1 P 2 C 2 W π 1 π 2 L 1 L 2 U nK 1 K 2 Q 1 Q 2 L g M X K m CO 2 E.
Given this simplified model we will consider a double dividend when the ETR
allows reducing CO 2 E while GDP increases or at least does not fall. A third dividend
of the ETR will be added when the unemployment rate, Un, also falls and even a
poverty indicator, such as welfare of the poorest households improves. Finally, the
fourth dividend of the ETR would arise when exports, X, are not required to significantly increase as consequence of its implementation (e.g. to introduce a foreign
cleaner new technology of production); otherwise, the ETR could fail. Even though
most of exported goods are commodities a sudden increase of exports is unrealistic and thus, the lack of exports could put under stress the foreign reserves of the
economies, which is a recurrent problem in developing countries.
As evidenced by the literature, not only factor market assumptions (e.g. wages
determination and capital mobility) but also the initial tax structure of the economy,
could condition the role of carbon taxes in approaching Pareto optimality. For
instance, in this simplified model, a new ad-valorem tax (e.g. carbon tax) t 2 charged
on final demand for the good 2 could reduce losses due to distortions rather than
increase them (when t 2 = t 1 ).
5 See the rest of the model explanation with ETR in
subsection 2.1.
References
Aldy JE, Levy E, Parry I (2010) What is the role of carbon taxes in climate change mitigation?”
PREMnotes 2. Washington, DC, United States: World Bank. Available at: http://www1.worldb
ank.org/prem/PREMNotes/Note2_role_carbon_taxes.pdf
Allan G, Lecca P, McGregor P, Swales K (2014) The economic and environmental impact of a
carbon tax for Scotland: a computable general equilibrium analysis. Ecol Econ 100:40–50
Balineau G, de Melo J (2011) Stalemate at the negotiations on environmental goods and services
at the Doha Round. FERDI Document de Travail (28)
Bento AM, Jacobsen M (2007) Ricardian rents, environmental policy and the ‘double-dividend’
hypothesis. J Environ Econ Manage 53(1):17–31
Böhringer C, Carbone J, Rutherford TF (2016) Embodied carbon tariffs. Scandinavian J Econ
Bovenberg AL, Goulder LH (2002) Environmental taxation and regulation. In: Handbook of public
economics, vol 3, pp 1471–1545. Elsevier
Bovenberg AL, Van der Ploeg F (1994) Consequences of environmental tax reform for involuntary
unemployment and welfare. CentER Discussion Paper 1994
Brock W, Scott Taylor M (2004) Economic growth and the environment: a review of theory and
empirics. NBER Working Paper 10854. National Bureau of Economic Research, Cambridge,
United States
CAIT Climate Data Explorer (2015) World Resources Institute, Washington, DC. Available online
at: https://cait.wri.org
Carraro C, Galeotti M, Gallo M (1996) Environmental taxation and unemployment: some evidence
on the ‘double dividend hypothesis’ in Europe. J Public Econ 62(1–2):141–181
5 This would be a case of “double dividend” in the weak sense in terms of Zhang y Baranzini (2000).