In political debates the high rate of unemployment in Germany is often blamed on the non-wage labour costs that have risen dramatically during the last few years. Therefore, the intended shift of tax burdens from the factor labour to the factor environment in an ecological tax reform is not only motivated by environmental, but also greatly by labour market considerations. However, whether a revenue-neutral tax on energy will not only lead to a drop in energy consumption (first dividend), but also to the desired positive effects on employment (second dividend) is a question researchers are divided over. What is decisive for the effects on employment is the incidence of the reduction in social security contributions, i.e. passing the reduction on to the real labour costs and the real net wage. With the help of an applied general equilibrium model the research project aims at providing an assessment that is as realistic as possible of the potential impacts of the first stage of the planned ecological tax reform on employment, international competitiveness and on the trend in CO2 emissions. The focus of the analysis will not only be on the German economy as a whole, but also on selected sectors such as the chemical industry, mechanical engineering or banking and insurance. More specifically, we will develop part of the model further, namely that part that deals with the labour market, by taking endogenous wage rigidities and involuntary unemployment into consideration. Furthermore, various exemption rules to protect export- and energy-intensive industries will be subjected to a detailed legal scrutiny.