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Mattias Derlén and Johan Lindholm INTRODUCTION 1. There are several regulatory solutions capable of protecting and enhancing the environment, one of these being (green) taxation. In selecting which regulatory option to use it is rational to seek for an “optimal policy”, meaning the regulatory solution that most effectively achieves the intended aim with the least amount of undesired side-effects. For example, several contributions in this volume discuss whether taxation or emission trading (a cap-and-trade system) is the better regulatory solution for the purpose of reducing CO2 emissions.1 The task of formulating an optimal environmental policy is a difficult one.2 Within the European Union, this is aggravated by a complex constitutional framework that largely places tax measures outside the scope of EU law. This chapter focuses on this constitutional framework and its effects on the use of green taxes and other environmental measures in the EU. To achieve this aim, we will make two important distinctions. First, 1 See contributions by Cockfield, A.; Milne, J.; Gumley, W., and Stoianoff, N.; Griffiths, S. 2 Much scholarly work in this area apply law and economics theory to approach this task. See, e.g., Albrecht, J., “The Use of Consumption Taxes to ReLaunch Green Tax Reforms,” International Review of Law and Economics, Volume 26, 2006, page 88; Andersen, M.S., “Environmental and Economic Implications of Taxing and Trading Carbon: Some European Experiences,” Vermont Journal of Environmental Law, Volume 10, 2008, page 61; Faure, M. and Johnston, J., “The Law and Economics of Environmental Federalism: Europe...