Effects of green tax reforms in Spain. A new analytical approach integrating micro and macro-economic models

In recent years, the so-called green tax reforms have become a relevant instrument in the environmental policies of the developed world. These reforms are based on the theory of the double dividend yielded by environmental taxation, which essentially argues in favour of the introduction of such taxation which is revenue-neutral and reduces distortionary taxation. Given the theoretical ambiguity that exists as to the manner and magnitude of the effects of such reforms, this paper proposes a new methodology which enables us to carry out a thorough analysis of the distributive and efficiency consequences. In order to do so, we have integrated a micro-econometric model representing household energy demand and an applied general equilibrium model. The simulation of a hypothetical reform in Spain shows that a tax on CO2 emissions, with a simultaneous reduction in social contributions, provides a win-win situation (environmental and fiscal). Furthermore, its distributive effects are virtually insignificant and relatively specific