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Green Taxes: A Note on the Double Dividend and the Optimal Tax Rate

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  • Vidar Christiansen

Abstract

The simplest pedagogical tools are employed to clarify that there is a double dividend from shifting the tax policy towards green taxes only if taxes were not set optimally before the environmental concern was put on the agenda. In general a single or less than single dividend cannot be ruled out. The note revisits the result of Sandmo (1975) that the second best optimal tax on a dirty commodity can be interpreted as being composed of a fiscal and an environmental part, and shows how the latter can be derived from a simple cost-benefit trade-off.

Suggested Citation

  • Vidar Christiansen, 1996. "Green Taxes: A Note on the Double Dividend and the Optimal Tax Rate," CESifo Working Paper Series 107, CESifo.
    • Handle: RePEc:ces:ceswps:_107
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    4. 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.
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