Market-Based Instruments

Market-Based Instruments (MBIs) are tools used to address environmental issues by harnessing market mechanisms. They include methods like taxes, subsidies, and tradable permits that create financial incentives for businesses and individuals to reduce pollution or conserve resources. For example, a carbon tax charges companies for their greenhouse gas emissions, encouraging them to lower their output. By assigning a monetary value to environmental impacts, MBIs aim to promote sustainable behavior and efficient resource use while allowing flexibility for businesses to find cost-effective solutions. Ultimately, they help integrate environmental considerations into economic decision-making.