Concerns about the threat posed to life and property by environmental degradation are increasingly taking centre stage in both domestic and international forums. The challenges posed by this threat have elicited varying policy responses from the regulatory authorities. This article looks at one aspect of that policy response, namely, the use of fiscal instruments by governments to shape the direction of their environmental policy. This article uses Australia's experience with tax expenditures and the implementation of environmental policy as a case study to provide a contemporary context for the analysis. The articles draws lessons from other OECD countries in suggesting refinements to Australia's tax expenditure rules.