The Double Dividend of Environmental Taxation

The thesis verifies the theory of the double dividend in the countries of Europe. Through panel regression, it analyses the impact of environmental taxes and emission allowances onto the metrics of particulate matter, greenhouse gas emissions and GDP. The environmental dividend is proven for the metric of PM2.5, while CO2e emissions grow with the rise of taxation. Furthermore, the economic dividend in the form of GDP growth has been attained. Three additional models have been estimated to verify the key mechanism of this dividend - the revenue recycling effect - which further prove its existence through the lowering of labour taxation with the rise of environmental taxation. The former has been measured both as the tax burden of the average wage as well as its tax wedge. The results thus prove that the degree of success of the European tax measures with the goal of environmental protection depends on the selection of the metric it is measured by. Mainly, however, they have a positive impact on the GDP, as with their revenues, the distortionary effects of other taxes may be lowered, which should create incentive to pursue economic activity, in accordance with economic theory. Enviromental taxation is thereby proven as a useful tool for improving the effectivenes of European economies, and the overall results of the thesis mostly speak in support of the theory of the double dividend.