This paper analyzes the effects of initiating energy taxes on the Taiwan economy. According to the simulations, it shows that energy taxes effectively reduce CO2 emission and energy consumption, but have negative effects on the macro economy and income distribution. Concerning the oil price effects, the negative effects of energy taxes on the economy can be alleviated if the oil price goes down. It is right time to put energy taxes into practice when the oil price is low. Furthermore, this study simulates three different ways of recycling tax revenues from energy taxes to the economy. Recycling energy tax revenues to reduce the individual income tax has advantages of protecting environment and restraining energy consumption, but makes the economy and income distribution worse. However, if energy tax revenues to reduce the corporate income tax, it improves the economy and income distribution, but causes unefficiency to protect environment and restrain energy consumption. Therefore, it can not be complete in both environmental and economic respects; the better way is to choose a compromise between them.