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 sys-tems that allow practitioners to assess the impacts of different policies or external shocks over an economicsystem. There is some empirical literature dedicated to test the double dividend hypothesis of an environ-mental tax reform using CGE models. This hypothesis claims that is possible to obtain an improvementof both environmental and economic conditions by imposing an environmental tax and recycling revenuesobtained to reduce other pre-existing taxes. This research provides a comprehensive review of this literatureincluding a statistical and a meta-regression analysis. 69 different simulations from 40 studies have beenanalyzed. 55% of simulations have achieved a double dividend, concluding that although the environmentaldividend is almost always achieved, the economic dividend still remains an ambiguous question that needsfurther research