The article by A. Lans Bovenberg and Ruud A. de Mooij explores the impact of environmental taxes on tax distortions and employment. They argue that while environmental taxes are often seen as an efficient tool for achieving environmental goals, they can exacerbate existing tax distortions, even when revenues from these taxes are used to reduce other distortionary taxes. The authors use a general equilibrium model to demonstrate that the optimal pollution tax is typically below the Pigovian tax, which fully internalizes the marginal social damage from pollution. This is because the collective good of environmental quality competes with other collective goods, leading to higher marginal costs of environmental policy. The model includes a linear production technology, where labor is the only input, and households optimize their utility by balancing private and public consumption. The welfare effects of a revenue-neutral change in the tax mix are analyzed, showing that an increase in the pollution tax can reduce employment if the uncompensated wage elasticity of labor supply is positive. This is because the higher pollution tax erodes the base of the environmental tax, leading to a decline in the real after-tax wage and reducing the incentives to supply labor. The authors conclude that in the presence of distortionary taxes, the optimal environmental tax is lower than the Pigovian tax. They suggest that using the revenues from pollution taxes to cut other distortionary taxes can achieve a "doubled dividend," reducing both environmental costs and the distortionary tax system. However, if revenues are recycled as lump-sum transfers, employment can decline more significantly, worsening preexisting tax distortions.The article by A. Lans Bovenberg and Ruud A. de Mooij explores the impact of environmental taxes on tax distortions and employment. They argue that while environmental taxes are often seen as an efficient tool for achieving environmental goals, they can exacerbate existing tax distortions, even when revenues from these taxes are used to reduce other distortionary taxes. The authors use a general equilibrium model to demonstrate that the optimal pollution tax is typically below the Pigovian tax, which fully internalizes the marginal social damage from pollution. This is because the collective good of environmental quality competes with other collective goods, leading to higher marginal costs of environmental policy. The model includes a linear production technology, where labor is the only input, and households optimize their utility by balancing private and public consumption. The welfare effects of a revenue-neutral change in the tax mix are analyzed, showing that an increase in the pollution tax can reduce employment if the uncompensated wage elasticity of labor supply is positive. This is because the higher pollution tax erodes the base of the environmental tax, leading to a decline in the real after-tax wage and reducing the incentives to supply labor. The authors conclude that in the presence of distortionary taxes, the optimal environmental tax is lower than the Pigovian tax. They suggest that using the revenues from pollution taxes to cut other distortionary taxes can achieve a "doubled dividend," reducing both environmental costs and the distortionary tax system. However, if revenues are recycled as lump-sum transfers, employment can decline more significantly, worsening preexisting tax distortions.