Environmental Taxes in Developing and Transition Economies

Abstract

This paper presents the theory of environmental taxation with special reference to developing countries (DC) and countries with economies in transition (TC). A review of the literature shows there exist several examples of environmental taxes being used to reduce environmentally harmful behavior. Central and Eastern Europe and the former Soviet Union and China have large-scale systems of pollution taxes and other countries are also experimenting with this type of instrument, particularly to reduce water pollution. Several countries have used taxes on environmentally harmful products, such as transport fuels, to raise revenues and reduce pollution. Challenges are associated with the use of environmental taxes in developing and transition countries, but the evidence suggests that despite shortcomings these instruments are making important contributions to environmental protection and economic efficiency.