European environmental taxes and charges: economic theory and policy practice

The environmental and economic benefits of environmental taxes and other market-based mechanisms over standards-based legislation have been strongly articulated in the economics literature. This paper examines these claims based on studies of the European Union Packaging Waste Directive, Evidence from the investigation indicates that the pollution-reducing effect of environmental taxation is severely constrained for price-inelastic commodities but that revenue hypothecation for defensive expenditures provides genuine possibilities for promoting environmental improvements whilst retaining the economic benefits of market-based regulation. The importance of empirical spatial analysis for theoretical and practical advancement is stressed and future research directions are suggested. (C) 2002 Elsevier Science Ltd. All rights reserved.