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Environmental pricing reform or Ecological fiscal reform is a fiscal policy of adjusting market prices to account for environmental costs and benefits; this is accomplished by the utilization of any forms of taxation or subsidy to incentivize or disincentivize practices with environmental impacts.
An externality exists where a market price omits environmental costs and/or benefits. In such a situation, rational economic decisions can lead to environmental harm, as well as to economic distortions and inefficiencies.
Environmental pricing reform can be economy-wide, or more focused or a particular environmental issue. A "market-based instrument" or "economic instrument for environmental protection" is an individual instance of Environmental Pricing Reform. Examples include green tax-shifting , tradeable pollution permits, or the subsidization of markets for ecological services.