Green and blue dividends and environmental tax reform: dynamic CGE model

The challenge of climate change needs to be tackled with environmental policies carefully designed for achieving environmental benets and avoiding negative economic eects. The introduction of an environmental tax in the economic system, can generate a double benet represented by the attainment of the environmental target (rst or green dividend) and other additional benets (second/third or blue dividends) represented by gains in welfare, employment, consumption etc. The policy should be therefore analysed through a general equilibrium analysis that is able to quantify the environmental and welfare direct and indirect eects generated within the economic system. Since international environmental agreements set clear target deadlines on the reduction of GHG emissions, in this paper a dynamic CGE model is developed, which is based on a bi-regional SAM framework for Italy.