Environmental Taxation

Environmental taxation has emerged as a critical instrument in the fiscal toolbox for addressing climate change, reducing pollution, and promoting sustainable economic transitions. Its growing prevalence in policy agendas reflects the increasing recognition of price-based mechanisms as efficient tools for internalizing environmental externalities. Yet, despite its rhetorical appeal, the term “environmental tax” is often attributed to instruments based solely on environmentally relevant tax bases irrespective of their regulatory intent or environmental effectiveness, blurring the line between corrective taxation and general revenue tools. As a result, the definitional indeterminacy surrounding environmental taxation weakens legal certainty, obstructs comparability across jurisdictions, and impairs the coherence of international tax coordination frameworks.

Despite the existence of a harmonized statistical definition at the OECD and EU levels, the concept of environmental taxation remains legally unanchored and functionally ambiguous. It raises practical questions: Should environmental taxes be narrowly defined as instruments designed to internalize negative externalities? Or can they...