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

F.J. Andre, M.A. Cardenete, E. Velazquez

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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.
Original languageEnglish
Place of PublicationTilburg
PublisherMacroeconomics
Number of pages33
Volume2003-125
Publication statusPublished - 2003

Publication series

NameCentER Discussion Paper
Volume2003-125

Keywords

  • environmental tax
  • general equilibrium
  • regional economics
  • tax reform
  • dividends

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    Andre, F. J., Cardenete, M. A., & Velazquez, E. (2003). Performing an Environmental Tax Reform in a regional Economy. A Computable General Equilibrium. (CentER Discussion Paper; Vol. 2003-125). Macroeconomics.