Environmental Tax Reforms and the Double Dividend

One of the most pressing environmental problems is how to reduce CO2 emissions in order to reduce the threat of global warming. For this purpose, in some countries environmental taxes are levied. A second dividend may be achieved by using the revenues of such a tax for other purposes such as the reduction of unemployment or the abolition of distortionary taxes. But will this double dividend be realistic for Germany?
Based on a theoretical model, Christian M. Scholz performs numerical simulations to find out whether there are positive effects for households and firms. Most effects on employment are not large enough to warrant the term 'double dividend'. In general, it is better to levy environmental taxes only for environmental objectives.