Ecological tax reform and efficiency of taxation: A public good perspective

Revenue-neutral ecological tax reforms are known to yield a green dividend, but not an efficiency dividend, in general. This result is shown to be not counter-intuitive when one looks at such reforms as providing more of the costly public good 'environmental quality' financed by distortionary taxes. In that perspective the double dividend conjecture is tantamount to assuming that more environmental quality can be bought for less money, which is rather unlikely even if general equilibrium interdependencies are accounted for.