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Recycling CO2 Tax Revenue and the Carbon Dividend: A Guide to the Literature

Author

Listed:
  • LEA FRICKE

    (University of St Gallen and ifo Institute)

  • CLEMENS FUEST

    (ifo Institute and University of Munich)

  • DOMINIK SACHS

    (University of St Gallen and ifo Institute)

Abstract

This paper discusses the seemingly contradicting implications of the carbon dividend concept and the double dividend idea for the use of revenue from carbon pricing. We provide an introduction to a number of key contributions to this debate in the literature and explain how their findings and results can be reconciled. Some existing studies on the effects of revenue recycling through the carbon tax may be too optimistic regarding the impact because they neglect the interaction between the carbon dividend, labour supply, and the rest of the tax system.

Suggested Citation

  • Lea Fricke & Clemens Fuest & Dominik Sachs, 2025. "Recycling CO2 Tax Revenue and the Carbon Dividend: A Guide to the Literature," Hacienda Pública Española / Review of Public Economics, IEF, vol. 254(3), pages 45-57, September.
    • Handle: RePEc:hpe:journl:y:2025:v:254:i:3:p:45-57
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    References listed on IDEAS

    as
    1. van der Ploeg, Frederick & Rezai, Armon & Tovar Reanos, Miguel, 2022. "Gathering support for green tax reform: Evidence from German household surveys," European Economic Review, Elsevier, vol. 141(C).
    2. Lawrence Goulder, 1995. "Environmental taxation and the double dividend: A reader's guide," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 2(2), pages 157-183, August.
    3. Andrej Woerner & Taisuke Imai & Davide D. Pace & Klaus M. Schmidt, 2023. "How to Increase Public Support for Carbon Pricing," ISER Discussion Paper 1228, Institute of Social and Economic Research, The University of Osaka.
    4. Jacobs, Bas & van der Ploeg, Frederick, 2019. "Redistribution and pollution taxes with non-linear Engel curves," Journal of Environmental Economics and Management, Elsevier, vol. 95(C), pages 198-226.
    5. Cremer, Helmuth & Gahvari, Firouz & Ladoux, Norbert, 2003. "Environmental taxes with heterogeneous consumers: an application to energy consumption in France," Journal of Public Economics, Elsevier, vol. 87(12), pages 2791-2815, December.
    6. Stefano Carattini & Steffen Kallbekken & Anton Orlov, 2019. "How to win public support for a global carbon tax," Nature, Nature, vol. 565(7739), pages 289-291, January.
    7. Frederick Ploeg, 2023. "Fiscal Costs of Climate Policies: Role of Tax, Political, and Behavioural Distortions," De Economist, Springer, vol. 171(2), pages 119-137, June.
    8. Freire-González, Jaume, 2018. "Environmental taxation and the double dividend hypothesis in CGE modelling literature: A critical review," Journal of Policy Modeling, Elsevier, vol. 40(1), pages 194-223.
    9. Andrej Woerner & Taisuke Imai & Davide Pace & Klaus Schmidt, 2023. "How to Increase Public Support for Carbon Pricing," Rationality and Competition Discussion Paper Series 489, CRC TRR 190 Rationality and Competition.
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    Keywords

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    JEL classification:

    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General

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