Double-dividend effect from prefectural carbon tax based on two responsibility for CO2 emissions

In this paper, the impact of the introduction of a carbon tax is examined with a regional computable general equilibrium model based on two accounting principles. The carbon tax is levied on the basis of the “polluter pays principle” (PPP) and the “user pays principle” (UPP). The double-dividend effect of recycling the revenue from the carbon tax for a reduction of the residence tax (RT) and the payroll tax (PT) on employers for social security is examined. In all cases, while no strong double dividend effect is found, employment double dividend occurs in PT cases. Levying on the basis of UPP is most desirable to reduce CO₂ emissions, as well as to discourage carbon leakage.