Market based instruments for environmental policymaking in Latin America and the Caribbean: lessons from eleven countries

Abstract

This article summarizes a comprehensive series of country studies in Latin America and the Caribbean (LAC), addressing experiences with market based instruments (MBIs) and command and control (CAC) approaches. First, MBIs can be an important means for introducing some added efficiency to existing CAC mechanisms. The scope of the MBIs must, however, match the institutional capacity to implement them. MBI approaches that introduce gradual and flexible reforms are therefore more likely to be consistent with ongoing institutional changes. Second, while the revenue collection task of MBIs is often highlighted, there is a strong need to channel revenues to local authorities to assist in building institutional capacity. Finally, international donor agencies are most prone to recommend OECD solutions with little regard to institutional issues. Moreover, most of the information flow regarding MBIs has been of a 'north-south' variety, whereas increased information sharing in a 'south-south' dialog would benefit all parties.