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Environmental taxes are a form of incentive regulation available to governments to drive reductions in environmental impact. The aims of this study were to: 1) develop a framework that enabled quantification of the potential effect of environmental taxes on pig diet composition and 2) examine the relationship between tax level and its effectiveness in reducing environmental impacts from pig systems. Three taxes were investigated: a carbon tax on the feed ingredients as purchased, and two financial penalties on the field spreading of N and P in manure respectively. Each tax was integrated into a diet-formulation model for pig diets in Eastern and Western Canada and tested at a range of tax levels. The two regions use different feed ingredients and constitute a test for spatial variation in the consequences of tax measures on diet-formulation. In each case diets were formulated to minimise feed cost per kg of live weight gain and the effect of the tax on feed cost as well as on predicted N and P excretion by the pigs were calculated. The results were then tested in a Life Cycle Assessment model representative of pig farming systems in the two regions, which calculated the potential effect of the diets on the aggregated environmental impacts of each farming system. The environmental impact implications of each environmental tax were quantified using four impact categories: Global Warming Potential, Acidification Potential, Eutrophication Potential and non-renewable resource use. As environmental tax levels increased, trigger points in the tax range caused dietary change which reduced levels of the targeted emission type. In almost all the tax scenarios the largest reductions in the target emission per Canadian Dollar (C$) increase in cost were achieved at the lower end of the tax range tested, as diminishing marginal returns were evident. The taxes on spreading N and P in manure did not significantly reduce levels of any environmental impact category tested in most cases. In many of the scenarios the environmental taxes altered the diet in a way which significantly increased levels of at least one of the environmental impact categories considered. These results showed the potential for taxes which target specific emissions, to increase system-level environmental impacts in livestock production. The study demonstrated how system-level environmental impact models can be used to quantify the potential of environmental taxes set at different rates to reduce overall environmental impact levels in livestock systems. [ABSTRACT FROM AUTHOR]