Market-based instruments (MBIs) operate as either a price-based or quantity-based instrument, although instruments aimed at improving the operation of existing markets–termed ‘market-friction’ instruments–are often included as market instruments.
MBIs come in many different shapes and sizes, but they generally fall into three broad categories:
Influence behaviour by modifying or discovering prices for environmental goods and services.
Can work as a positive or negative incentive.
Examples include conservation tenders, taxes and charges, tax concessions, subsidies & rebates. |
Influence behaviour by modifying or specifying rights or obligations associated with the use of natural resources.
Rights and obligations created or altered are often tradable.
Examples include compliance offsets & tradable emissions permits.
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Influence behaviour by making existing markets work better to achieve environmental outcomes.
Generally enhance information in the market place or lower transactions costs within a market.
Examples include green labelling & web-based water entitlement exchanges.
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Not all MBIs fit neatly into one type. They may have elements of more than one type, or they may be used in conjunction with another MBI or policy tool (e.g. regulation). For example, a water quality offset scheme (a quantity-based MBI approach) may also make use of conservation tenders (a price-based approach) as a way of finding cost-effective offset actions.
There may also be an opportunity to address two or more environmental issues by incorporating them into a single market-based approach. Where the gains from combining issues outweigh the costs, MBIs can be designed to optimise NRM outcomes across each different issue.
* Collins, D and Scoccimarro, M (2008) MBI Decision Support Tool. |