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Definition and Sociological Motivations
Environmental pricing reform (EPR) is the process of adjusting market prices to include environmental costs and benefits. In theory, if prices are adjusted in this regard, both the environment and individuals will benefit. Pricing reforms can be progressive and tailored to individual communities in order to produce these benefits, avoiding adverse distributional effects. One study suggests that by shifting the tax burden to polluters rather than employment, it is possible to benefit both the environment and aid in higher employment rates.

Examples
Environmental pricing reform can be economy-wide, or more focused (e.g. specific to a sector (such as electric power generation or mining) or a particular environmental issue (such as climate change). A "market-based instrument" or "economic instrument for environmental protection" is an individual instance of Environmental Pricing Reform.  Examples include green tax-shifting (ecotaxation), tradeable pollution permits, or the creation of markets for ecological services.

Ecological Fiscal Reform
A similar term, "ecological fiscal reform" differs in more narrowly dealing with fiscal (i.e. tax) policies as opposed to using non-fiscal regulations to achieve the government's environmental goals. One example of this involves raising taxes on motor fuels as a way to reduce pollution as well as increase tax revenue.

Conflicts
An externality (a type of market failure) exists where a market price omits environmental costs and/or benefits. In such a situation, rational (self-interested) economic decisions can lead to environmental harm, as well as to economic distortions and inefficiencies. Such inefficiencies are illustrated in irrigation and water pricing in Europe, where more efficient and cheap irrigation tactics, while more convenient and accessible, can possibly have detrimental effects on the environment.

