The double-dividend debate evolves around the possibility (or not) of substituting environmental taxes for more distortionary taxes to reduce both pollution degradation and/or damages (the first dividend) and the excess burden of existing taxes (the second dividend), without eroding tax...

This paper contributes to the double dividend debate with a formal analysis and some numerical evidence emphasizing trade and environmental distortions with a substitution of environmental taxes for trade distortions. We derive existence conditions and we empirically explore the...