Policy instruments

Abstract

The concept of sustainability may lead to the need for constraints or targets (for example, safe minimum standards) to make the use of environmental resources more sustainable. However, setting such targets does not per se guarantee the attainment of sustainability. What is needed is change in the behaviour of economic actors so that targets consistent with the concept of sustainability are met. In order to alter the actors’ behaviour, incentive mechanisms that lead them to modify their decisions on environmental resource use must be established within the framework of economic and social institutions. Such mechanisms may not be provided without policy intervention. Environmental policies – public policies for environmental quality improvement or sustainable use of environmental resources – must be employed to provide economic actors with incentives to make decisions with consideration for the environmental impacts their actions may have. Environmental economics has a major role to play in the design of such policies, and the choice of environmental policy instruments is crucial in designing environmental policies.