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Performing an environmental tax reform in a regional economy. A computable general equilibrium approach


  • Francisco André


  • M. Cardenete
  • Esther Velázquez


We use a Computable General Equilibrium model to simulate the effects of an Environmental Tax Reform in a regional economy (Andalusia, Spain). The reform involves imposing a tax on CO2 or SO2 emissions and reducing either the Income Tax or the payroll tax of employers to Social Security, and eventually keeping public deficit unchanged. This approach enables us to test the so-called double dividend hypothesis, which states that this kind of reform is likely to improve both environmental and non-environmental welfare. In the economy under analysis, an employment double dividend arises when the payroll tax is reduced and, if CO2 emissions are selected as environmental target, a (limited) strong double could also be obtained. No double dividend appears when Income Tax is reduced to compensate the environmental tax.
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Suggested Citation

  • Francisco André & M. Cardenete & Esther Velázquez, 2005. "Performing an environmental tax reform in a regional economy. A computable general equilibrium approach," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 39(2), pages 375-392, June.
  • Handle: RePEc:spr:anresc:v:39:y:2005:i:2:p:375-392 DOI: 10.1007/s00168-005-0231-3

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    References listed on IDEAS

    1. Diamond, Peter A, 1984. "Money in Search Equilibrium," Econometrica, Econometric Society, vol. 52(1), pages 1-20, January.
    2. Brueckner, Jan K. & Zenou, Yves, 1999. "Harris-Todaro models with a land market," Regional Science and Urban Economics, Elsevier, vol. 29(3), pages 317-339, May.
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    Cited by:

    1. Alberto Gago & Xavier Labandeira & Xiral López Otero, 2014. "A Panorama on Energy Taxes and Green Tax Reforms," Hacienda Pública Española, IEF, vol. 208(1), pages 145-190, March.
    2. Manuel Alejandro Cardenete Flores, 2006. "Federalismo fiscal a partir de un modelo de equilibrio general aplicado: Andalucía VS. España," Economic Working Papers at Centro de Estudios Andaluces E2006/22, Centro de Estudios Andaluces.
    3. M. Carmen Lima & M. Alejandro Cardenete, 2005. "Impact Assessment of European Structural Funds in Andalusia - a CGE Approach," ERSA conference papers ersa05p154, European Regional Science Association.
    4. repec:pal:jorsoc:v:59:y:2008:i:7:d:10.1057_palgrave.jors.2602415 is not listed on IDEAS
    5. Rodriguez, U-Primo E., 2007. "State-of-the-Art in Regional Computable General Equilibrium Modelling with a Case Study of the Philippines," Agricultural Economics Research Review, Agricultural Economics Research Association (India), vol. 20(1).
    6. Plassmann, Florenz & Feltenstein, Andrew, 2016. "How large do multi-region models need to be?," Journal of Policy Modeling, Elsevier, vol. 38(1), pages 138-155.
    7. Denise VAN REGEMORTER & Bert SAVEYN, "undated". "Environmental Policy in a Federal State: A Regional CGE Analysis of the NEC Directive in Belgium," Regional and Urban Modeling 284100045, EcoMod.
    8. Esther Velázquez & M. Alejandro Cardenete & Geoffrey J.D. Hewings, "undated". "Water Price and Water Relocation in Andalusia. A Computable General Equilibrium Approach," Regional and Urban Modeling 283600101, EcoMod.
    9. Francisco Javier André García & M. Alejandro Cardenete Flores, 2008. "Políticas económicas y ambientales eficientes en un contexto de equilibrio general aplicado," EKONOMIAZ. Revista vasca de Economía, Gobierno Vasco / Eusko Jaurlaritza / Basque Government, vol. 67(01), pages 72-91.
    10. André, Francisco J. & Cardenete, M. Alejandro, 2009. "Defining efficient policies in a general equilibrium model: a multi-objective approach," Socio-Economic Planning Sciences, Elsevier, vol. 43(3), pages 192-200, September.
    11. Mardones D., Cristián, 2012. "Chile: building a computable general equilibrium model with an application to the Bío Bío region," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), April.
    12. Abeer Elshennawy, 2011. "Is There A Triple Dividend Effect from A Tax on Fertilizer Use? A Computable General Equilibrium Approach," Working Papers 582, Economic Research Forum, revised 05 Jan 2011.
    13. Cámara Sánchez, Ángeles & Cardenete Flores, M.Alejandro & Monrobel Alcántara, José Ramón, 2014. "Matrices de Contabilidad Social y Modelos de Equilibrio General Aplicado elaborados en España a nivel regional/Social Accounting Matrices and Applied General Equilibrium Models Developed in Spain at R," Estudios de Economía Aplicada, Estudios de Economía Aplicada, vol. 32, pages 427-454, Enero.
    14. Francisco J. André & M. Alejandro Cardenete & Carlos Romero, 2007. "A goal programming approach for a joint design of macroeconomic and environmental policies: a methodological proposal and an application to the spanish economy," Working Papers 07.12, Universidad Pablo de Olavide, Department of Economics.
    15. M. Alejandro Cardenete & G.J.D. Hewings & E. Velázquez, 2005. "Precio del agua y relocalización del recurso en la economía andaluza. Una aproximación desde un modelo de equilibrio general aplicado," Economic Working Papers at Centro de Estudios Andaluces E2005/22, Centro de Estudios Andaluces.
    16. repec:eee:enepol:v:107:y:2017:i:c:p:524-531 is not listed on IDEAS
    17. Francisco J. André & M. Alejandro Cardenete, 2009. "Efficient Economic and Environmental Policies Combining Multicriteria Techniques and General Equilibrium Modelling," Working Papers 09.08, Universidad Pablo de Olavide, Department of Economics.
    18. Dorothée Boccanfuso & Antonio Estache & Luc Savard, 2008. "Intra-Country Distributional Impact of Policies to Fight Climate Change: A Survey," Working Papers ECARES 2008_038, ULB -- Universite Libre de Bruxelles.
    19. Francisco J. André & M. Alejandro Cardenete Flores, 2006. "Designing Efficient Policies in a Regional Economy. A MCDM-CGE Approach," Economic Working Papers at Centro de Estudios Andaluces E2006/03, Centro de Estudios Andaluces.
    20. Bröcker, Johannes & Korzhenevych, Artem & Schürmann, Carsten, 2010. "Assessing spatial equity and efficiency impacts of transport infrastructure projects," Transportation Research Part B: Methodological, Elsevier, vol. 44(7), pages 795-811, August.
    21. Francisco J. André & Manuel Alejandro Cardenete, 2005. "Multicriteria Policy Making. Defining Efficient Policies in a General Equilibrium Model," Economic Working Papers at Centro de Estudios Andaluces E2005/04, Centro de Estudios Andaluces.
    22. Cardenete, Manuel Alejandro & Hewings, Geoffrey, 2011. "Water Price and Water Sectoral Reallocation in Andalusia. A Computable General Equilibrium Approach1," 2011 Conference: Impacts of Climate Change on Agriculture, December 6-7, 2011, Rabat, Morocco 188124, Moroccan Association of Agricultural Economics (AMAEco).
    23. Dorothée Boccanfuso & Antonio Estache & Luc Savard, 2008. "Distributional impact of global warming environmental policies: A survey," Cahiers de recherche 08-14, Departement d'Economique de l'École de gestion à l'Université de Sherbrooke.

    More about this item


    D58; H21; H23;

    JEL classification:

    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies


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