T his chapter deals with fuel taxation and its counterpart: regulation of fuel efficiency. A degree of fatalism sometimes creeps into discussions concerning environmental policymaking. Those who suggest drastic taxes are seen as unrealistic idealists. However, the mere range of fuel taxes that exists today (in the developed as well as the developing countries) is amazing. In some countries, fuels are still essentially subsidized, and in others, the level of taxation has raised the effective market price to three or four times the world market price. Although the main motive is not always environmental, this diversity should help illustrate the fact that the range of possible policies is somewhat wider than what everyday policy debates assume.