market-based mechanisms

Market-based mechanisms are tools that use the principles of supply and demand to address issues like environmental protection or resource allocation. They create economic incentives—such as tradable allowances or taxes—to encourage businesses and individuals to act sustainably or efficiently. For example, a cap-and-trade system sets a limit on pollution emissions and allows companies to buy or sell permits within that cap, motivating reduction efforts. These mechanisms harness market forces to achieve social or environmental goals cost-effectively, aligning private interests with broader public benefits without requiring direct regulation.