Reconciling environmental policy with employment, international competitiveness and participation requirements

We argue that a conventional double dividend policy - defined as reduction of greenhouse gas emissions and unemployment through taxation of energy and CO2 emissions and subsidization of wage costs - and the aim of keeping international competitiveness intact are mutually exclusive concepts. It is suggested that a double dividend policy that aims at reducing GHG emissions and unemployment without violation of international competitiveness has to tax energy use and CO2 emissions of households and should use the revenues to subsidize investment in energy-saving technologies to reduce marginal costs of firms. Reduction of energy coefficients lowers marginal costs and prices and therefore increases competitiveness and employment in an environmentally friendly way and may induce other parts of the world to participate in GHG emission reduction policies. According to this proposal the principle of causation has to be dropped nationally but not internationally.