Performing an Environmental Tax Reform in a Regional Economy. A Computable General Equilibrium Approach

Francisco J. André (), M. Alejandro Cardenete () and Esther Velázquez Alonso ()
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Esther Velázquez Alonso: Universidad Pablo de Olavide, http://www.upo.es

No E2004/04, Economic Working Papers at Centro de Estudios Andaluces from Centro de Estudios Andaluces

Abstract: We use a Computable General Equilibrium model to simulate the effects of an Environmental Tax Reform in a regional economy (Andalusia, Spain). The reform involves imposing a tax on CO2 or SO2 emissions and reducing either the Income Tax or the payroll tax of employers to Social Security, and eventually keeping public deficit unchanged. This approach enables us to test the so-called double dividend hypothesis, which states that this kind of reform is likely to improve both environmental and non-environmental welfare. In the economy under analysis, an employment double dividend arises when the payroll tax is reduced and, if CO2 emissions are selected as environmental target, a (limited) strong double could also be obtained. No double dividend appears when Income Tax is reduced to compensate the environmental tax.

Keywords: environmental tax reform; computable general equilibrium; double dividend. (search for similar items in EconPapers)
JEL-codes: D58 H21 H23 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mic and nep-pbe
Date: 2004
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Related works:
Working Paper: Performing an environmental tax reform in a regional economy. A computable general equilibrium approach (2003)
Working Paper: Performing an Environmental Tax Reform in a Regional Economy: A Computable General Equilibrium Approach (2004)
Journal Article: Performing an environmental tax reform in a regional economy. A computable general equilibrium approach (2005)
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