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Syncrude's oil sands plant at Mildred Lake, north of Fort McMurray, Alta.Kevin Van Paassen

Environmental taxes -- such as carbon taxes on CO2 emissions -- are an effective way to clean up pollution while lighting a fire under technological innovation, according to a new report from the Organization for Economic Co-operation and Development.

The report, which considers case studies from Japan, Korea, Spain, Sweden, Switzerland and Sweden, is unabashedly enthusiastic about environment-related taxes.

These levies encourage companies to put in place pollution abatement measures, and they provide "significant incentives for innovation, as consumers seek new, cleaner solutions in response to the price put on pollution," the report says.

They can also make it commercially attractive for the polluter, or a third party innovator, to pump money into R&D, it says.

Even firms that don't innovate may bring in the latest technologies that have been developed elsewhere. The report cites the example of a Swiss tax on volatile organic compounds, which affected printers, paint makers and metal cleaners. These firms didn't do their own R&D, but they adopted technologies from outside, or tried small innovations the led to reductions in VOC use.

International co-operation is key in effectively imposing environmental taxes, the OECD said, so that polluters don't just abandon ship and move to locations where they can get away with their bad practices.

Over all, the report argues that market forces alone are not enough to fix environmental issues or generate the innovation needed to develop clean technologies.

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