Acid deposition is widely recognized as a regional environmental problem, the chief causes of which are oxides of sulphur and nitrogen emitted during combustion of fossil fuels. In this paper we consider the economic significance of acid rain phenomena and the relative usefulness of the different instruments available to reduce their effects. As an illustration, we examine the likely effects of the application of a hypothetical Spanish sulphur tax on the electricity producers. Since it is possible to recognize the amount of sulphur dioxides which will be emitted in the combustion of different types of fossil fuels, a product tax accompanied by fiscal rebates for desulphurizing processes is used as a proxy of the genuine emissions tax. The introduction of such a tax is likely to have important effects on the Spanish economy, at least in the short term, Given the current reliance of the electricity sector on coal fired stations for its production, the tax will involve significant increases in the price of electricity. The sulphur tax revenues are likely to be considerable, although the induced environmental benefits will probably be less relevant: most Spanish soils are resistant to acid depositions, and the influence of Spanish induced depositions abroad are small. In any case, the long-term effects will probably be fairly neutral in price and tax revenue modifications. In fact, the SO2 tax is likely to encourage a faster and cheaper move towards the restructuring of the Spanish electricity sector to less dirty coal fired stations, a total closure of the fuel oil fired plants, and new cleaner production capabilities with extensive introduction of the natural gas.