Are market-based instruments effective tools for environmental management?

Abstract

Abstract Over the past few decades market-based instruments have enjoyed increasing use in environmental management. To examine whether market-based instruments are effective tools for environmental management, a range of evaluations from the literature covering point- and non-point-source pollution control, along with biodiversity management, were reviewed. As found in other reviews, the environmental context of the particular issue being addressed is a key determinant of instrument performance. Market-based instruments have been applied most successfully to the management of industrial point-source pollution issues. In these cases, emissions have generally proven to be reasonably easy to measure and have had sufficiently direct relationships with their environmental impacts. In contrast, the diffuse-source environmental problems commonly encountered in rural contexts proved to be less amenable to market-based solutions. In these situations, difficulties in clearly linking management actions with environmental outcomes generally undermined their effectiveness and efficiency.