Box 3.1 Economic instruments
Economic
instrument
Mechanism
Controls
via
Area of
application
Taxes
The “cost" of pollution, forcing producers to include
pollution in their calculation of production expenses.
Price
International/
national/
(local)
Tradable quotas
Emissions quotas can be traded between enterprises to
limit emissions in the most cost-effective way
Quantity
International/
national/
local
Joint
Implementation
Bilateral implementation of pollution reduction measures
across national borders, to reduce pollution in the most
cost-effective way
Quantity
International
Subsidies
Financial support for research and development,
technology, etc., or to improve framework conditions.
Price
International/
national/
local
Voluntary
agreements
Voluntary reductions of emissions, in exchange for being
exempted from a tax.
Quantity
National/
local
User charges
Direct payment for a compulsory service to make an
actual expense visible.
Price
National/
local
Environmental
liability
Obligation to restore damage to environmental assets, or
pay compensation if the damage caused cannot be
restored.
Price (via
insurance)
National
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