Double Dividend Research Articles

A Computable General Equilibrium Analysis of Environmental Tax Reform in Japan

The Japanese government plans to reduce greenhouse gas emissions by 80% by 2050. However, it is not yet clear which policy measures the government will adopt to achieve this goal. In this regard, environmental tax reform, which is the combination of carbon regulation and the reduction of existing distortionary taxes, has attracted much attention. This paper examines the effects of environmental tax reform in Japan. Using a dynamic computable general equilibrium (CGE) model, we analyze the quantitative impacts of environmental tax reform and clarify which types of environmental tax reform are the most desirable. In the simulation, we introduce a carbon tax and consider the following five scenarios for the use of carbon tax revenue: 1) a lump-sum rebate to the household, 2) a cut in social security contributions, 3) a cut in income taxes, 4) a cut in corporate taxes and 5) a cut in consumption taxes. The first scenario is a pure carbon tax, and the other four scenarios are types of environmental tax reform. Our CGE simulation shows that environmental tax reform tends to generate more desirable impacts than the pure carbon tax by improving welfare or increasing GDP while reducing emissions (double dividend). In particular, we show that a cut in corporate taxes leads to the most desirable policy in terms of GDP and national income.

Does China's carbon emission trading policy have an employment double dividend and a Porter effect?

The implementation of China's carbon emission trading policy has targeted achieving emission reduction and environmental protection as well as promoting economic development and technological innovation. The analysis is made through applying the Difference-in-Differences model and using the Ordinary Least Squares method and the Least Square Dummy Variable method in the paper. Results show that the pilot carbon emission trading policy leads to the expansion of employment scales and the reduction of carbon emissions after controlling for the environmental regulation, population size, economic level, and other important variables. Thus, it implies that an employment double dividend exists. For the Porter effect, it is found in the pilot carbon emission trading policy only without adding any control variable. The effect is further verified based on a robustness checks and a placebo test. Furthermore, from the perspective of market-oriented environmental regulation policy, this study explains that the carbon emission trading system launched in 2017 needs to be improved to spread both the employment double dividend and the Porter effect to the whole nation. China also needs to form a complete set of strict ecological environment protection policies and administrative measures to achieve sustainable development of the economy.

The retention effect of training: Portability, visibility, and credibility1

This paper analyses the effect of training participation on employees’ retention in the training establishment. On the basis of the human capital and monopsony theories the effect of portability, visibility, and credibility of training on employee retention is jointly calculated. We use an extensive German linked employer–employee panel data set with detailed survey information on the training history and administrative labour market information of 4318 employees working in 149 establishments (WeLL-ADIAB). In multivariate panel regressions including internal instruments we compare the probability of staying with the same employer between training participants and employees who were by chance unable to participate in a planned training event. The high portability of training contents and training visibility provided by training certificates reduce the retention effect of training independently. Retention is reduced further when training content is reported credibly, that is, it is provided and certified by external institutions. However, the total effect of portable, visible, and credible training on retention is still positive. This paper therefore implies that employers can reap a double dividend of higher productivity and increased retention even from general, visible, and credible training.

Impacts of Potential China's Environmental Protection Tax Reforms on Provincial Air Pollution Emissions and Economy

AbstractChina's environmental protection tax (EPT) has been implemented since the beginning of 2018 to control environmental issues (e.g., air pollution). The current EPT law indicates that tax revenues are given to provincial governments without return. However, tax revenue redistribution is the key to achieving a so‐called “double dividend”; that is, an environmental tax could benefit both the environment and economic efficiency. Based on our previous analysis of the effectiveness of the current EPT, we further explore whether the double dividend could be achieved under different tax reforms based on the multiregion and multisectoral computable general equilibrium model. We find that recycling the EPT revenue to reduce household income tax (EPT_Int) is an efficient way to achieve the double dividend, and there is no double dividend if the EPT revenue is compensated by reducing enterprise income tax (EPT_Ent) or by investing in solar power (EPT_Sol). Combining EPT_Int and EPT_Sol could be a better approach if more air pollution emissions reductions are required to achieve the national reduction targets. At the provincial level, recycling the EPT revenues to reduce household income tax could offset the negative effect of environmental tax on the economy and achieve the double dividend in all provinces, especially the provinces with higher emission intensity, such as Shanxi, Hebei, Inner Mongolia, and Guizhou Provinces. This result shows that provinces with high emission intensity may further reduce air pollutant emissions during the post‐EPT era.

The economic and environmental impacts of UK offshore wind development: The importance of local content

We explore, through simulation of a purpose-built Input-Output model of the UK, the economic and emissions impacts of the likely future development of the UK’s offshore wind sector, with a particular emphasis on the importance of local content. We explore six scenarios, including two illustrative simulations of the potential impact of Brexit on local content. We find that future offshore wind development does indeed generate a policy “double dividend” in the form of simultaneous and substantial reductions in cumulative emissions, which in each case exceed a year of the UK’s total emissions, and improvements in economic activity (of nearly £30 billion cumulative increase in value-added when the 60% target for local content is achieved). It is also the case that, as anticipated, the scale of the economic stimulus arising from offshore wind development is directly and strongly related to the extent of local content. Future work could extend the modelling to relax the supply side assumptions of input-output modelling, disaggregate the analysis by regions and households to allow assessment of the impacts on the distribution of both economic activity across regions and income among household quintiles.

Is technological innovation the effective way to achieve the "double dividend" of environmental protection and industrial upgrading?

In recent years, the global emphasis on environmental protection issues has gradually increased. The existing literature has been divided on whether environmental regulation promotes or inhibits industrial development. Can the innovation-driven strategy proposed by China achieve a win-win situation for both? This paper attempts to investigate the technology innovation of China's three major economic zones in dual environmental regulation effect on industrial structure upgrade. The research was conducted based on Intermediary Effect Model and employing the technique of Image Analysis, panel data of 30 Chinese provincial from in 2005 to 2017 were selected and analyzed. The results demonstrate that the direct effect of formal environmental regulations (ER) on industrial upgrading is an inverted "U" shape, and it is positively affecting industrial upgrading through technological innovation strategies. However, the mediating role of technological innovation under the informal environmental regulation (IER) is negative. The effect of the innovation-driven strategy has regional heterogeneity, and marketization is conducive to industrial upgrading, but increasing dependence on foreign trade is not conducive to industrial upgrading. The research above politically suggests that China should further strengthen formal and informal environmental regulations, the informal environmental regulation system should be improved, and feedback mechanisms such as laws should be established. Meanwhile, the government should carry out innovation-driven strategies based on local conditions, improve the innovation mechanism, and enhance the diffusion of technological innovation.

Economics of irrigation water conservation: Dynamic optimization for consumption and investment

Measures to protect irrigation water supplies for food security continue to receive international attention to address growing water scarcity when faced by increased food demands combined with reduced water supply reliability. Yet, a common problem where water is delivered with earthen canals is delivery inefficiency combined with low economic values per unit of water. In many of the world's arid regions, climate stressed water shortages have raised the importance of discovering measures to improve irrigation delivery efficiency. However, little research grade work to date has presented an integrated analysis of the economic performance of irrigation delivery improvements faced by drought and climate stressed regions. This paper's unique contribution is to investigate the economic performance of water conservation infrastructure combined with dynamically optimized use of saved water. We develop a state-of-the arts empirical dynamic optimization model to discover land and water use patterns that optimize sustained farm income. Results from the upper watershed irrigation region of the Canadian Basin in the southwestern US show that canal and delivery system lining can raise the sustained economic value of water for crop irrigation. The saved water can see immediate use in dry years. It can also be stored in wet years to mitigate the most adverse impacts of future climate water stress. This double dividend is especially important in rain-fed watersheds for which surface water supplies for irrigation are difficult to forecast accurately. Findings light a path for water managers and other stakeholders who bear responsibility of finding economically responsible measures to improve irrigation water productivity in the world's dry regions.

Double Dividends and Mixed Blessings: Structural Transformation, Income Inequality and Employment Dynamics

This paper provides an introduction to a special section on structural transformation, income inequality and employment dynamics. The set of papers in the special section in different ways revisit the seminal works of Lewis, Kuznets and Kaldor in a contemporary context.

State of the art in carbon taxes: a review of the global conclusions

Carbon taxes have been advocated as a key economic measure for the reduction of greenhouse gas emissions. The basis of this proposition,is the economic theory that applying a tax on carbon dioxide emissions is the optimal solution to addressing the market failure of externalities. In moving from theory to practice,the evidence from comprehensive global assessments,over the last three decades,covering actual policy experience and empirical study of policy effects,requires evolution and refinement of the theory. Carbon taxes are not adopted at the scale,coverage or price level necessary to effectively reduce emissions in line with the Paris Agreement. A persistent implementation gap has arisen,largely due to the political and social challenges that accompany taxation. Assessments of policy experience in key sectors of built environment,transport and industry,highlight the critical role of regulation,standards and technology among broader policy programmes. While a carbon tax can provide simplicity and scope,it is not sufficient on its own. Consistent with this finding,recent modelling innovations show that taxes can be employed as part of a portfolio of best practice policies and measures,for deep reduction of emissions. Portfolios can facilitate application of a lower,more moderate carbon tax,which enhances the social acceptability and political feasibility of the tax itself. When designing a tax,revenue recycling can help with policy resistance,delivering the double dividend of economic and climate gains,and addressing distributional considerations. A carbon tax may be useful to complement the broader portfolio of policies and measures accepted as necessary for long-term transition and transformation. It can offer support and prevent rebounds,but is not a substitute for the fundamental systems change that is at the core of addressing urgent sustainability crises.

Environmental Tax Reform and the "Double Dividend" Hypothesis in a Small Open Economy.

In this paper, we build and analyze a general equilibrium model to evaluate the effects of environment tax reform on a small open economy in a “suboptimal environment” with existing tax distortions. We then use the macroeconomic data from the Chongqing Municipality in China to conduct simulations to empirically test our analytic results. Our main findings include the followings. First, an increase in environmental tax rate can effectively reduce the use of polluting consumer goods by households as well as investment in polluting factors by enterprises. Hence, an increase in environmental tax rate can improve environmental quality and obtain “environmental dividend”. Second, an increase in environmental tax rate can negatively impact employment, family income and economic growth. Hence, there is no “non-environmental dividend” effect. Third, an increased environmental tax rate has both substitution effect and income effect on household consumption. On the one hand, it motivates households to substitute polluting consumer goods with clean consumer goods. On the other hand, it lowers the total consumption level of households. Fourth, we show that the “double dividend” hypothesis on environmental tax is invalid. And the optimal environmental tax under the suboptimal environment is lower than the Pigouvian tax rate. Finally, we discuss the policy implications of our results.

Evolutionary macroeconomic assessment of employment and innovation impacts of climate policy packages

Climate policy has been mainly studied with economic models that assume representative, rational agents. Such policy aims, though, at changing carbon-intensive consumption and production patterns driven by bounded rationality and other-regarding preferences, such as status and imitation. To examine climate policy under such alternative behavioral assumptions, we develop a model tool by adapting an existing general-purpose macroeconomic multi-agent model. The resulting tool allows testing various climate policies in terms of combined climate and economic performance. The model is particularly suitable to address the distributional impacts of climate policies, not only because populations of many agents are included, but also as these are composed of different classes of households. The approach accounts for two types of innovations, which improve either the carbon or labor intensity of production. We simulate policy scenarios with distinct combinations of carbon taxation, a reduction of labor taxes, subsidies for green innovation, a price subsidy to consumers for less carbon-intensive products, and green government procurement. The results show pronounced differences with those obtained by rational-agent model studies. It turns out that a supply-oriented subsidy for green innovation, funded by the revenues of a carbon tax, results in a significant reduction of carbon emissions without causing negative effects on employment. On the contrary, demand-oriented subsidies for adopting greener technologies, funded in the same manner, result in either none or considerably less reduction of carbon emissions and may even lead to higher unemployment. Our study also contributes insight on a potential double dividend of shifting taxes from labor to carbon.

Evaluating the performance of carbon tax on green technology: evidence from India.

Introduction of carbon tax and the resulting National Clean Energy and Environment Fund are seen as important policy reforms in India's quest for achieving energy security and reducing the carbon intensity of energy. This study seeks to evaluate the impact of carbon tax on R&D in energy efficient technologies. To carry out the analysis, the study employed the difference-in-difference technique for the period 2005-2017. The results highlighted that there are less chances of achieving a 'Double Dividend Hypothesis' for carbon tax in India. Except the renewable energy sector, the support initiatives for enhancing energy efficiency have been rather limited and the government's own revenue considerations seem to be dominating. The study holds that the NCEEF should be insulated from the vagaries of fiscal politics and that a strong reformation in guidelines, utilisation and allocation patterns is required to optimally realise the potential of the fund.

Does emissions trading affect labor demand? Evidence from the mining and manufacturing industries in China

We use “China's sulfur dioxide (SO2) emissions trading program” as a quasi-natural experiment to identify the causal effect of this market-based environmental regulation on firm's labor demand. Based on the difference-in-differences (DID) method and a series of robustness tests, we observe robust evidence that the emissions trading program significantly increases the labor demand of regulated firms, and that this positive employment effect is driven by the expansion of firm's production scale. The observable evidence leads us to cautiously conclude that the market-based environmental regulations in even developing countries could achieve the double dividend of coexistence of environmental protection and employment growth.

Commodity Storage, Post-Harvest Losses, and Food Security: Panel Data Evidence from Ethiopia

Abstract In Ethiopia, 95 % of total agricultural output comes from some 11 million smallholder farmers. A relatively significant proportion of the food grown in the country is stored at the household level by smallholder farm households, mainly for own consumption. Storage losses, generally perceived to be high, have significant implications for household food security. This study provides a microeconomic perspective of commodity storage, post-harvest losses (PHL), and food security in Ethiopia. It relies on a large-scale household panel dataset, the Ethiopia Socioeconomic Survey (ESS), which comprises 4,000 households in rural areas and small towns that are representative of the most populous regions of Ethiopia. The data were collected as part of the World Bank’s LSMS-ISA project; it involved three “waves” or collection periods: 2011/12, 2013/14, and 2015/16. Data from only the second and third waves were used to estimate a random-effects probit model. Findings show that the magnitude of PHL is substantial: damage is due to rodents and rotting related to traditional storage facilities, poor ventilation, humidity/temperature, and undesirable post-harvest handling. Findings also show that PHL decreases with better market access and improved storage practices. Mitigation measures that improve and promote modern grain storage facilities appear to provide a double dividend – reducing PHL while addressing food insecurity.

Environmental policy and ‘double dividend’ in a transitional economy

Although the environmental benefit from implementing a climate tax is usually realized, the economic dividend still remains a controversial issue warranting further research. This is because the impact of an environmental policy on an economy-wide system will depend on factors that differ from one region to the next. In this paper, we develop a static CGE model for Liberia that is capable of analyzing both a uniform and a partial carbon tax policy. Under the uniform policy instituted to ensure mitigation in the range of 20–50%, an economic dividend is found for energy, employment, and welfare. In particular, energy consumption increases by between 5 and 15.5%, respectively. Interestingly, under a second best policy which exempts economically strategic sectors from the tax, no economic dividend is found for all three variables. This time, energy use declines by between 2 and 9%. These suggest that a uniform environmental tax policy is a more viable option for Liberia, in particular, as it does not only generate economic dividend for employment and welfare, it also incentivizes Liberia's adoption and use of renewable energy technologies. In general, based on the results obtained, further conditions for the feasibility of a double dividend are proposed.

Does Environmental Tax Affect Energy Efficiency? An Empirical Study of Energy Efficiency in OECD Countries Based on DEA and Logit Model

OECD countries are the largest energy consuming economies in the world, improving energy efficiency and reducing pollution emissions is one of the important goals of the environmental tax policies of OECD countries. Based on the total factor energy efficiency index, this paper establishes an epsilon based measure-data envelopment analysis (EBM-DEA) model to measure the energy efficiency levels of 32 OECD countries during 1995–2016 when undesired outputs are included and not included. The effect of environmental factors on energy efficiency evaluation is compared by efficiency analysis and projection value analysis. On this basis, a Panel Logit model was established to empirically examine the impact of energy taxes on energy efficiency in 32 OECD countries. This paper finds that undesired output has a large impact on the energy efficiency level of OECD countries. Measuring energy efficiency levels without considering undesired outputs tends to lead to overestimation of the energy efficiency level of environmentally friendly countries and underestimate the energy efficiency level of countries that value environmental protection. The collection of energy tax has an important impact on energy consumption efficiency. Without considering the unexpected output, the energy tax has a significant impact on improving the efficiency of coal energy consumption. When considering the unexpected output, the energy tax has a significant impact on improving the efficiency of oil energy consumption. Regardless of the expected output or not, the energy tax has a positive effect on improving the efficiency of natural gas energy consumption. The experimental results also show that the energy structure and energy price have a negative impact on energy efficiency, while the progress of environmental protection technology and industrial structure have a positive impact on energy efficiency. Energy taxes have a “double dividend”. This paper argues that when evaluating a country’s energy efficiency, it should consider the undesired output factors of environmental constraints; governments should pay attention to the role of energy taxes in improving energy efficiency, improve the energy tax system, optimize industrial structure upgrades, stabilize energy prices and support the development of environmental technologies and improve energy efficiency.

Deriving double dividends through linking payments for ecosystem services to environmental entrepreneurship: The case of the invasive weed Lantana camara

A payment for ecosystem services mechanism is designed to support an environmental enterprise aimed at controlling Lantana camara, an invasive weed that is costly to eradicate. A forest reserve manager engages the local community in lantana control efforts. The community converts the weeds into household durable items for sale. However, as markets for such products may not account for the environmental services generated through weed control, the enterprise could fail for want of additional financial support. The challenge addressed in this paper is to incorporate the full environmental benefits of the weed-based enterprise and provide adequate compensation to the local community. An optimal compensation mechanism is derived through linking the ecological dimension of weed growth to its impact on biodiversity values within the reserve. Results indicate that optimal payments to the community would need to take into consideration both the value addition to the environment from controlling the invasive weed and the opportunity cost of participation by the community. When there exists a risk of enterprise failure due to low profitability, higher payments by the manager are required. However, the best environmental outcomes are obtained when the manager incorporates the welfare of the local community within the utility function.

GREEN TAX REFORM AND EMPLOYMENT DOUBLE DIVIDEND IN EUROPEAN AND NON-EUROPEAN COUNTRIES: A META-REGRESSION ASSESSMENT

In this paper we present a meta-regression analysis of simulation studies concerning green tax reform (GTR). Our study investigates the employment effect of GTR across European and non-European countries. The existing literature postulates that employment double dividend (EDD) is achievable; however, the majority of the studies come from European countries. In this paper, we compared the performance of GTR led EDD in European and non-European contexts to observe whether there is any notable difference across country groups. Our results show that both tax and tax revenue recycle policies play a significant role in determining the employment effect. However, the optimal policy mix is not identical for European and non-European countries. Region specific policy design is required for optimal employment effect.

The effect of pollutant charges on economic and environmental performances: Evidence from Shandong Province in China

Environmental taxes can play an important role in reducing pollution issues. However, they also have an impact on the entire economy. This paper uses panel data from Shandong Province in China from 2005 to 2016 to analyze the impact of pollutant charges on the economic and environmental performances. The results show that the payment transfer of pollutant charges can influence the output but the effects varies with regions and time. Pollutant charges increase the resource utilization efficiency and promote economic growth. After controlling output and industry structure, pollutant charges on waste gas improve the air quality. This study confirms the existence of the environmental tax double dividend and provides a reference for new environmental protection taxes.

The Impact of a Carbon Tax on Inequality

Climate change and economic inequality are inextricably linked. Despite widespread agreement among researchers and policymakers that a carbon tax is the most efficient mechanism to curb greenhouse gas emissions, such a tax exacerbates inequality since low-income households spend a greater share of their income on carbon-intensive goods. Using Input-Output tables and detailed expenditure data for the United States, we estimate households' carbon footprints and examine the impact of a revenue-neutral tax of $50 per ton of CO2 on multiple forms of inequality. Devoting carbon tax revenue to fund a carbon dividend makes the policy progressive, minimizes redistribution among households of similar means, mitigates group-based inequalities, and benefits 56% of people, including 84% in the bottom half of the distribution. While some researchers have dismissed dividends on efficiency grounds, we show that the double dividend typically associated with labor tax cuts is insufficient to protect the purchasing power of a majority of Americans.