An externality (a type of market failure) exists where a market price omits environmental costs and/or benefits. In such a situation, rational (self-interested) economic decisions can lead to environmental harm, as well as to economic distortions and inefficiencies.
Environmental pricing reform can be economy-wide, or more focussed (e.g. specific to a sector or environmental issue such as climate change. A "market based instrument" or "economic instrument for environmental protection" is an individual instances of Environmental Pricing Reform. Examples include green tax-shifting (ecotaxation), tradeable pollution permits, or the creation of markets for ecological services.
Canada Can Reduce Greenhouse Gas Emissions by Using Fiscal Instruments and Incentives, New National Round Table Report Says
Aug 18, 2005; OTTAWA, ONTARIOCCNMatthews - Aug. 18, 2005) - Federal and provincial governments should consider a range of fiscal instruments to...