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.
An
externality
In economics, an externality or external cost is an indirect cost or benefit to an uninvolved third party that arises as an effect of another party's (or parties') activity. Externalities can be considered as unpriced goods involved in either co ...
(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.
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.
See also
*
Ecotax
*
Environmental accounting
*
Environmental economics
*
Environmental enterprise
*
Environmental finance
References
External links
Redefining ProgressSustainable ProsperityGreen Budget Germany
Economy and the environment
Market-based environmental policy instruments
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