Asian countries have adopted environmental related taxes to control pollution issues such as air and water pollution for decades, while recent years carbon pricing instruments have been introduced in a few Asian economies to tackle climate change challenges. This study reviews existing practices of environmental related taxes and carbon pricing instruments in Asia and find that these policy instruments are effective to deliver positive environmental impacts, guide people’s behavior, as well as contributing to government revenue. We discuss the challenges faced by Asia markets during the implementation, particularly, competitiveness concerns, distributional impacts, and Monitoring, Reporting and Verification (MRV) and a few policy options to address them. We suggest that developing Asia to accelerate the adoption of such green tax instruments to free fiscal spaces for foster development as well as guiding behavior and investments towards sustainable development. Asia also needs to implement innovative complimentary policies along with the environmental related tax instruments to address climate change and other pollution issues in the region.

JEL Classification: E01; E62; H23; O13