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Environmental pricing reform

From Wikipedia, the free encyclopedia

Environmental pricing reform (EPR) or Ecological fiscal reform (EFR) is a fiscal policy of adjusting market prices to account for environmental costs and benefits; this is accomplished by the utilization of any forms of taxation or subsidy to incentivize or disincentivize practices with environmental impacts.[1][2]

An externality (a type of market failure) exists where a market price omits environmental costs and/or benefits. In such a situation, rational (self-interested) economic decisions can lead to environmental harm, as well as to economic distortions and inefficiencies.[3]

Environmental pricing reform can be economy-wide, or more focused (e.g. specific to a sector (such as electric power generation or mining) or a particular environmental issue (such as climate change). A "market-based instrument" or "economic instrument for environmental protection" is an individual instance of Environmental Pricing Reform. Examples include green tax-shifting (ecotaxation), tradeable pollution permits, or the subsidization of markets for ecological services.[4]

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  1. ^ Thompson, David (May 2010). "The Power of Prices and the Failure of Markets" (PDF). The Edmonton Sustainability Papers. City of Edmonton. Archived from the original (PDF) on 10 May 2015. Retrieved 3 January 2015.
  2. ^ Beauregard-Tellier, Frédéric (17 March 2006). "Ecological Fiscal Reform". Parliament of Canada. Archived from the original on 3 January 2015. Retrieved 3 January 2015.
  3. ^ Mankiw, Gregory N. (2012). Principles of Economics (6th ed.). Mason: South-Western Cengage Learning. pp. 196. ISBN 9780538453059.
  4. ^ OECD (2015-06-25). Taxing Energy Use 2015: OECD and Selected Partner Economies. Taxing Energy Use. OECD. doi:10.1787/9789264232334-en. ISBN 978-92-64-23232-7.

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