ABSTRACT
Environmental tax reform (ETR) involves the substitution of one tax with another that specifically taxes environmentally damaging activities, without any net impact on the government budget balance. This Chapter assesses the potential of ETR in four East Asian countries and shows that the macroeconomic impacts of ETR are quite small and could, in some circumstances, be positive. Regarding tax increases, the question may change from: to the chapter explores whether the current economic and fiscal positions in the four East Asian countries under consideration provide the grounds for introducing taxes on carbon emissions without including an offset reduction in other taxes. The model results identified the most important factors, but there are, of course, a variety of other possible factors, both within and outside the modeling framework. In Japan the results suggest that labor costs are not an important determinant of employment levels, whereas in the other three countries they clearly are.
