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
In neoclassical economics, market failure is a situation in which the allocation of goods and services by a free market is not Pareto efficient, often leading to a net loss of economic value. Market failures can be viewed as scenarios where indiv ...
) 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
Mining is the extraction of valuable minerals or other geological materials from the Earth, usually from an ore body, lode, vein, seam, reef, or placer deposit. The exploitation of these deposits for raw material is based on the economic v ...
) or a particular
environmental issue
Environmental issues are effects of human activity on the biophysical environment, most often of which are harmful effects that cause environmental degradation. Environmental protection is the practice of protecting the natural environment on t ...
(such as
climate change
In common usage, climate change describes global warming—the ongoing increase in global average temperature—and its effects on Earth's climate system. Climate change in a broader sense also includes previous long-term changes to ...
). A "
market-based instrument" or "economic instrument for environmental protection" is an individual instance of Environmental Pricing Reform. Examples include green tax-shifting (
ecotax
An environmental tax, ecotax (short for ecological taxation), or green tax is a tax levied on activities which are considered to be harmful to the environment and is intended to promote environmentally friendly activities via economic incentives. ...
ation), tradeable pollution permits, or the subsidization of markets for ecological services.
See also
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Ecotax
An environmental tax, ecotax (short for ecological taxation), or green tax is a tax levied on activities which are considered to be harmful to the environment and is intended to promote environmentally friendly activities via economic incentives. ...
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Environmental accounting Environmental accounting is a subset of accounting proper, its target being to incorporate both economic and environmental information. It can be conducted at the corporate level or at the level of a national economy through the System of Integrate ...
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Environmental economics
Environmental economics is a sub-field of economics concerned with environmental issues. It has become a widely studied subject due to growing environmental concerns in the twenty-first century. Environmental economics "undertakes theoretical or ...
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Environmental enterprise
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Environmental finance
Environmental finance is a field within finance that employs market-based environmental policy instruments to improve the ecological impact of investment strategies. The primary objective of environmental finance is to regress the negative impact ...
References
External links
Redefining ProgressSustainable ProsperityGreen Budget Germany
Economy and the environment
Market-based environmental policy instruments
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