Ecological Tax Reform

Abstract

Where used effectively, ecological taxes have the potential to make appropriate environmental decisions an automatic part of every economic decision. They are flexible to different needs and changing conditions. They induce people to use their own information and ideas about how to reduce pollution most effectively. At the same time they raise revenue that can replace distortionary taxation on income and capital. They are a valuable part of the environmental regulation toolbox and although they are not appropriate for addressing all environmental problems they are probably currently underutilised and worthy of more investigation.