Environmental taxation and the double dividend hypothesis in CGE modelling literature: a critical review

Computable general equilibrium (CGE) modelling is a flexible and open way to model the economic systems that allow practitioners to assess the impacts of different policies or external shocks over an economic system. There is some empirical literature dedicated to test the double dividend hypothesis of an environmental tax reform using CGE models. This hypothesis claims that is possible to obtain an improvement of both environmental and economic conditions by imposing an environmental tax and recycling revenues obtained to reduce other pre-existing taxes. This research provides a comprehensive review of this literature including a statistical and a meta-regression analysis. 69 different simulations from 40 studies have been analyzed. 55% of simulations have achieved a double dividend, concluding that although the environmental dividend is almost always achieved, the economic dividend still remains an ambiguous question that needs further research.