Following a period of modest economic growth, Portugal entered a sharp recession in 2008-09 and its public finances deteriorated significantly. The anti-crisis stimulus package included several environment-related measures, such as support for energy efficiency, renewable energy technologies, and investment in electricity and smart grids. Reforming the tax system, further expanding environmentally related taxes, and removing environmentally harmful tax concessions and subsidies could help fiscal consolidation without hampering economic recovery. Public funds, including those from EU sources, continue to account for about two-thirds of total environmental expenditure. Nonetheless, private environmental investment, ecoindustries and related employment have increased in recent years. Portugal needs to further promote eco-innovation and improve its workforce skills, with a view to enhancing productivity, international competitiveness, and the growth prospects of its economy.