Environmental tax reform (ETR) is a shift in the target of taxation from ‘goods’ such as labour (e.g. income taxes, social security contributions) or capital (e.g. corporation taxes) to ‘bads’ (pollution, resource depletion). The objectives of ETR are to increase the efficiency of resource use, to improve the environment, and ultimately to increase human well-being through both economic and environmental pathways. This research programme used econometric and resource flow modelling techniques, surveys, and interviews to explore the implications – for Europe and the rest of the world – of a large-scale ETR in Europe designed to achieve the EU’s greenhouse gas reduction targets by 2020. The results show that a broadly based ETR across Europe could play a very important role in meeting the EU’s emission reduction targets. However, different national political, economic, institutional and cultural contexts mean that it will not be a politically straight-forward policy instrument to introduce.