Tracing the second dividend in environmental policies : a CGE application to Turkey

Abstract

As the threat of global warming is becoming more evident, the governments are called for a joint action to reduce the greenhouse gas emissions and prevent climate change, by the Intergovernmental Panel on Climate Change and its legally binding successor, the Kyoto Protocol. The inevitability of environmental policy implementation in such a context has focused the recent energy-environmenteconomy literature on the examination of costs related with those policy measures and the possibility of a double dividend, i.e. economic improvements along with environmental benefits. This study, by making use of a ten sector CGE model for Turkey, searches for the second dividend in the presence of environmental taxation by payroll tax reductions. The results indicate that it is possible to achieve emission reductions with no additional burden on the economy if the environmental taxes are accompanied by a reduction in payroll taxes.