Product taxes and environmental tax differentiation: Design and implementation

New environmentally related product taxes or the differentiation of existing taxes such as VAT or excise taxes can both be used to create incentives for environmental improvement. Successful introduction of well-functioning environmentally related product taxes will generally require close coordination between different branches of government, in particular between the environment ministry and the ministry of finance. There are several possible ways to implement environmentally related product taxes. This section addresses such implementation issues as revenue raising, competitiveness and income distribution concerns.