This paper analyzes the economic effects of environmental taxation on chemical fertilizer in producing rice. A charge of 10 percent of nitrogen fertilizer leads to a reduction in fertilizer use of 1.5%, unchanged in rice yield, and a reduction in farm income of 0.5%. A levy of 100 percent leads to a reduction of 14.6% in fertilizer use, 0.3% in rice yield, and 3.1% in farm income. A significant feature of eco-taxes on chemical fertilizers is their revenue potential, which could contribute to the government budgets, finance pollution control programs such as education and R&D. This study provides insight into the application of market-based instruments for developing sustainable agriculture.