Ecological Tax Reform: Theory, Modified Double Dividend and International Aspects

Economists have discussed the options of an ecological tax reform for many years. There is indeed a broad range of literature on ecological tax reform (e.g. BOVENBERG et al., 1994, 1995; SCHOLZ, 1997; KLEPPER/ SCHOLZ/ PEFFEKOVEN/ VON WEIZSÄCKER, 1998; WELFENS, 1999) which suggests that raising energy taxes could internalize negative external effects from production and energy-intensive consumption while reducing labour costs from the additional tax revenue in order to stimulate more employment. As regards the objective of internalizing negative external effects in energy generation charges should be differentiated according to the specific CO₂ content (we disregard other emissions) which is rather high in the case of coal but low for gas and zero for hydroelectricity.