Revisiting the Double Dividend Hypothesis with the Load Capacity Factor

Abstract

The aim of the paper is to test the validity of the double dividend hypothesis in the five OECD countries with the highest environmental taxes (Türkiye, Slovenia, Latvia, the Netherlands and Denmark) using panel data analysis. With this motivation, the paper analyses the effects of environmental taxes on the load capacity factor and unemployment through two models for the period 1997-2022. According to the empirical findings, environmental taxes are cointegrated with both the load capacity factor and unemployment. The coefficient results of the first model reveals that environmental taxes positively affect the load capacity factor in Türkiye and Slovenia as well as at the panel level. Environmental taxes cause environmental degradation only in Denmark. In the second model, environmental taxes reduce unemployment in Latvia, the Netherlands, Denmark and at the panel level. In sum, the paper confirms the double dividend hypothesis for the panel.