ABSTRACT
This chapter discusses pollution taxes and economic instruments and considers the framework within which decisions on the instruments. The fiscal framework determines the present scope for raising pollution taxes and for funding environmental protection, as well as the ability of the authorities to charge for damage. The public's views on pollution taxes and charges for environmental services, and concern for the effects of these on low-income households and on competitiveness, need to be considered to ensure that policies are acceptable in the minds of the public. In some Scandinavian countries where pollution taxes are more widespread, heavy polluters have received exemptions. However at the level of the firm, environmental compliance costs can have a more significant effect, especially for pollution-intensive and resource sectors such as chemicals, mining, oil refining, pulp and paper. Earmarking the revenue from pay for pollution taxes to environmental improvements is sometimes advised in order to promote acceptance of the tax.
