An ecotax is a market-based environmental policy instrument that has been implemented in different forms in many countries all over the world. The idea behind ecotaxes is that economic activity leads to environmentally harmful external effects (e.g., carbon dioxide emissions produced by factories or car traffic), and these external effects lead to “external costs” that have to be paid mostly by the entire society rather than the polluter himself. An ecotax, therefore, should help as a price signal to confront polluters with the ecological consequences of their economic action and follows, more or less, the “polluter pays” principle.

Ecotaxes can be levied on emissions like carbon dioxide (carbon taxes), on the consumption of energy (e.g., on fuels, power consumption), or on dangerous goods like batteries or ...

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