ABSTRACT
Proponents of environmental fiscal policy reform often depict the arrows of influence between the government and the market as running one way: government sets the rules for the market, and businesses and consumers obey. The prescription that flows from this picture is straightforward. All policymakers need to do is get the tax and subsidy signals right, and the global economy will be on an environmentally sustainable, prosperous course. But any realistic assessment of the global environmental predicament must recognize that markets influence governments as well as the other way around. Fiscal policy is nothing if not political.
