CO-TAX in Developing countries: Prerequisites

Developing countries could derive greater benefits from Market Based Instruments (MBIs) and Economic Instruments (EIs)if they were introduced early in the policy development process. In fact, structural adjustment and economic and fiscal reforms should provide a unique opportunity to implement economically efficient resource management instruments. This is all the more necessary as command and control regulations are facing great difficulties in developing countries, particularly due to the lack of appropriate administrative and judicial structures and political will. Corruption is also eroding the enforcement process.

There are many issues and prerequisites to the application of EIs in developing economies. The following is a non-exhaustive list of supportive preconditions for eco-tax.

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Above information derives from OECD paper.