ecological fiscal reform

Ecological fiscal reform (EFR) is "a strategy that redirects a government's taxation and expenditure programs to create an integrated set of incentives to support the shift to sustainable development. "1 EFR includes the use of such policy tools as taxation, tax exemptions, permit trading, tax rebates, direct virtue expenditure, program grant expenditure and tax credits.

EFR includes reforms or redirections of subsidy, credit and direct expenditure programs, as well as what is commonly called ecological tax reform (ETR), environmental tax shifting or a "green tax shift". ETR involves adjusting existing taxes to make them sensitive to environmental impacts, or levying new ecological taxes to offer incentives to reduce environmental impacts and "recycling" the revenue from the new taxes. ETR revenue can be recycled in numerous ways - for example, by using it to fund reductions in existing taxes, new credit or subsidy programs, or refunds to taxpayers.