Mexico has to confront difficult trade-offs in pursuing its economic, social and environmental goals. This chapter examines Mexico’s use of taxation policy to pursue environmental and social objectives and progress in removing environmentally harmful subsidies. The chapter also looks at other economic instruments to implement the polluter-pays and user-pays principles and to recover the cost of providing environmental services. Mexico’s innovation performance, including on environment, is also assessed. Finally, the chapter briefly reviews the environmental dimension of Mexico’s development co-operation and mechanisms for environmental co-operation in trade agreements.