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International audience ; This article analyzes the impacts of Environmental Tax Reform (ETR) when the government is constrained not to increase the public debt-to-output ratio. We consider an overlapping generations model with pollution. Public spending for pollution abatement are financed by tax revenues and public debt. We show that keeping constant the public debt-output ratio is not an obstacle to attain a double dividend, i.e. an increase of both (i) environmental quality and (ii) aggregate consumption. First, if the capital stock is low and the pollution abatement is large enough, a successful ETR consists in a rise of the environmental tax, compensated by a decrease of the income tax. Secondly, we show that the environmental tax revenues may help reduce the public debt-output ratio. We give conditions (on the initial level of the environmental tax and the debt-output ratio) such that an increase of the environmental tax, budget-balanced by a decrease of the debt-output ratio may also achieve a double dividend. We conclude that public debt crisis should not compromise ETR, instead, environmental tax revenues could be part of the solution. JEL: Q5, H23, H63 / KEY WORDS: Environmental Tax Reform, Debt, Public Emission Abatement, Double Dividend, Overlapping Generations Model

International audience ; This article analyzes the impacts of Environmental Tax Reform (ETR) when the government is constrained not to increase the public debt-to-output ratio. We consider an overlapping generations model with pollution. Public spending for pollution abatement are financed by tax revenues and public debt. We show that keeping constant the public debt-output ratio is not an obstacle to attain a double dividend, i.e. an increase of both (i) environmental quality and (ii) aggregate consumption. First, if the capital stock is low and the pollution abatement is large enough, a successful ETR consists in a rise of the environmental tax, compensated by a decrease of the income tax. Secondly, we show that the environmental tax revenues may help reduce the public debt-output ratio. We give conditions (on the initial level of the environmental tax and the debt-output ratio) such that an increase of the environmental tax, budget-balanced by a decrease of the debt-output ratio may also achieve a double dividend. We conclude that public debt crisis should not compromise ETR, instead, environmental tax revenues could be part of the solution. JEL: Q5, H23, H63 / KEY WORDS: Environmental Tax Reform, Debt, Public Emission Abatement, Double Dividend, Overlapping Generations Model

International audience ; This article analyzes the impacts of Environmental Tax Reform (ETR) when the government is constrained not to increase the public debt-to-output ratio. We consider an overlapping generations model with pollution. Public spending for pollution abatement are financed by tax revenues and public debt. We show that keeping constant the public debt-output ratio is not an obstacle to attain a double dividend, i.e. an increase of both (i) environmental quality and (ii) aggregate consumption. First, if the capital stock is low and the pollution abatement is large enough, a successful ETR consists in a rise of the environmental tax, compensated by a decrease of the income tax. Secondly, we show that the environmental tax revenues may help reduce the public debt-output ratio. We give conditions (on the initial level of the environmental tax and the debt-output ratio) such that an increase of the environmental tax, budget-balanced by a decrease of the debt-output ratio may also achieve a double dividend. We conclude that public debt crisis should not compromise ETR, instead, environmental tax revenues could be part of the solution. JEL: Q5, H23, H63 / KEY WORDS: Environmental Tax Reform, Debt, Public Emission Abatement, Double Dividend, Overlapping Generations Model

International audience ; This article analyzes the impacts of Environmental Tax Reform (ETR) when the government is constrained not to increase the public debt-to-output ratio. We consider an overlapping generations model with pollution. Public spending for pollution abatement are financed by tax revenues and public debt. We show that keeping constant the public debt-output ratio is not an obstacle to attain a double dividend, i.e. an increase of both (i) environmental quality and (ii) aggregate consumption. First, if the capital stock is low and the pollution abatement is large enough, a successful ETR consists in a rise of the environmental tax, compensated by a decrease of the income tax. Secondly, we show that the environmental tax revenues may help reduce the public debt-output ratio. We give conditions (on the initial level of the environmental tax and the debt-output ratio) such that an increase of the environmental tax, budget-balanced by a decrease of the debt-output ratio may also achieve a double dividend. We conclude that public debt crisis should not compromise ETR, instead, environmental tax revenues could be part of the solution. JEL: Q5, H23, H63 / KEY WORDS: Environmental Tax Reform, Debt, Public Emission Abatement, Double Dividend, Overlapping Generations Model

International audience ; This article analyzes the impacts of Environmental Tax Reform (ETR) when the government is constrained not to increase the public debt-to-output ratio. We consider an overlapping generations model with pollution. Public spending for pollution abatement are financed by tax revenues and public debt. We show that keeping constant the public debt-output ratio is not an obstacle to attain a double dividend, i.e. an increase of both (i) environmental quality and (ii) aggregate consumption. First, if the capital stock is low and the pollution abatement is large enough, a successful ETR consists in a rise of the environmental tax, compensated by a decrease of the income tax. Secondly, we show that the environmental tax revenues may help reduce the public debt-output ratio. We give conditions (on the initial level of the environmental tax and the debt-output ratio) such that an increase of the environmental tax, budget-balanced by a decrease of the debt-output ratio may also achieve a double dividend. We conclude that public debt crisis should not compromise ETR, instead, environmental tax revenues could be part of the solution. JEL: Q5, H23, H63 / KEY WORDS: Environmental Tax Reform, Debt, Public Emission Abatement, Double Dividend, Overlapping Generations Model

Although market-based environmental measures like uniform CO2 taxes reach a given standard at minimal cost, they do not prevail in real world policies. An efficiency oriented environmental policy fails, as it involves a redistribution of pollution rights, resulting in a strong and generally effective opposition of the groups that forego economic rents. The present paper analyzes the trade-off between efficiency and political feasibility of several CO2 tax and reimbursement schemes, using a computable general equilibrium model of Switzerland. The simulation results indicate that a policy combining a uniform CO2 tax with differentiated labor subsidies preventing intersectoral redistribution is a better solution for the tradeoff than the presently existing tax schemes in various countries.

This report highlights lessons regarding impacts, costs and acceptance from the implementation of environmental tax reform (ETR) in industrialised countries that are most transferable to the developing country context. The report draws together the experience of the authors in selected developing countries in connection with these lessons learned and relates them to the more general developing country context. At the centre of the report are lessons learned relating to ETR design, taking into account trade-offs that policymakers in developing countries may have to consider between environmental effectiveness, fiscal objectives, private investment, social equity issues, and political considerations to ensure that ETR measures are politically feasible and sustainable.