The double dividend: Miracle or fata morgana?

The discussion on an ecological tax reform has as a central element the ide a of a double dividend: to get a better environment, a better tax system wi th less distortions, and therefore more growth and employment with the one and same stroke. Is it a miracle or fata morgana? In Germany, this discussi on came to a halt when the country's comparative disadvantages within the g lobalization process became painfully apparent and the political emphasis s hifted towards (still unsuccessful) attempts to social and structural refor ms. The article sheds some light on problems which presumably would have oc curred if the strategy of the double dividend had been implemented - or whi ch could occur in the future if the occasion arises. It is shown that techn ical progress could lead to abrupt losses in tax revenues and provoke count er-strategies in the political sector to secure the economic dividend, whic h are analyzed from welfare economic and political economic perspectives. T he findings are that, due to political self-interest, only low tax solution s (in the inelastic part of the marginal abatement cost curve) would be cho sen, which implies that the double dividend strategy does not seem to be a politically feasible route to reach strict environmental goals. It is furth er shown that these tax rates would be near to the maximum revenue rate, an d that this would also be the dominant strategy for all politicians irrespe ctive of their individual value-orientation. The conclusion is that theoret ically a double dividend policy will be far from a miracle and that the pol itical approach to it will presumably turn it into a fata morgana.