The OECD launched a new report exploring the relationship between environmentally related taxation and innovation. The report examines questions such as do environmentally related taxes spur innovation? What types of innovation result? Does the design of the tax play a critical role? What is the effect of this innovation? In analysing these questions, this report draws on case studies that cover Japan, Korea, Spain, Sweden, Switzerland, the United Kingdom, Israel and others.

OECD and many other governments already apply a range of taxes to energy, air and water pollutants and waste. According to the OECD, environmental taxes, along with tradable permit systems, are the most cost-effective and efficient environmental policy tool available.

The OECD goes on to state that citizens and industry react to green taxes by changing their behaviour, especially if government gives a strong signal that they intend to maintain tax rates and the price of carbon at high levels in the long-term.

Full details of the report can be accessed at http://www.oecd.org/document/6/0,3343,en_2649_34295_46091974_1_1_1_1,00.html