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The Double Dividend hypothesis in a CGE model: Specific factors and the carbon base

Iain Fraser () and Robert Waschik ()

Energy Economics, 2013, vol. 39, issue C, 283-295

Abstract: We use a Computable General Equilibrium model to empirically examine the Double Dividend (DD) hypothesis. Using the GTAP model data for Australia, we examine three environmental taxes on the production of energy goods. Following Bento and Jacobsen (2007), we examine the role played by specific factors in the production of energy goods. Our results provide support for the existence of a strong DD in Australia when revenue is recycled through reductions in consumption taxes. The strong DD is larger when the share of specific factors is higher, and is much more pronounced when carbon taxes are charged on the production (origin-based accounting) rather than the usage (destination-based accounting) of carbon. These results draw attention to the importance of the definition of the carbon base and have implications for the scale of carbon leakage.

Keywords: Environmental taxes; Double Dividend; Specific factors (search for similar items in EconPapers)
JEL-codes: Q52 Q48 C68 (search for similar items in EconPapers)
Date: 2013
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