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Environmental economics

Green Paper on Market Based Instruments

Market-based instruments (MBI), such as environmental taxes, tradable permit systems or targeted subsidies, are a cost-effective way to protect and improve the environment. They provide incentives to firms and consumers to opt for greener production or products.

The Green Paper explores options for the more intensive use of MBI in various important areas of environmental and energy policy at both Community and national levels. Subjects covered include:

  • possible ways forward with the Energy Taxation Directive in view of its announced review
  • water pricing
  • sustainable waste management.
  • Habitat banking to protect biodiversity,
  • trading instruments to reduce local air pollution.
  • instruments to reduce the environmental impact of transport.
  • Experiences with Environmental Tax Reforms in several Member States

The Commission wants to launch a debate on the further use of market-based instruments in these areas. Therefore the Green Paper asked a series of questions on these issues. The consultation period ended 31 July 2007.

This green paper is a joint project of Commissioners Dimas and Kovács. It is therefore equally accessible from the website of the Directorate General for Taxation and Customs Union.

See also the Commission Communication (COM/2007/0140 final) and the Commission's working document en (.pdf, 139KB).

Please see the document analysing the replies to the Green Paper. You can also find the replies to the Green Paper consultation here.