Although the theoretical literature has proposed several policy tools to deal with environmental problems, most empirical investigations have focused on energy taxation as the main (sometimes unique) instrument to control polluting emissions. The reason is quite simple: taxation is one of the few incentive-based policy variables that can be used to protect the environment. More importantly, emission charges may raise relevant tax revenues, which could be used to cut the high levels of distortionary taxation that exist in industrialized countries. In this way, it would be possible to achieve a cleaner environment and a less distortionary tax system, with obvious beneficial effects on the economy in the case in which the two objectives can actually be achieved.1