In year 2001, the Government of the Balearic Islands decided to establish a tourism tax, named "ecotax", as an important measure to achieve a more sustainable tourism model for the islands. This paper analyses the background of the ecotax, the objectives of the measure, its functioning and the criteria for the projects in which funds will be invested. Before implementation of the measure, some research was undertaken by the University of the Balearic Islands to analyse potential impact on tourism demand and on the image of the islands: main results from this research are highlighted in the paper. Results from a large residents attitude survey are also described as well as tourism industry reaction to the measure.