Economic Instruments

Economic instruments can help to achieve sustainable development by creating the financial incentives to change behaviour in favour of more sustainable consumption and production patterns. UNEP's Economics and Trade Branch aims to enhance capacities of governments, policy makers, private sector decision makers, and civil society to develop, design and implement economic instruments that contribute to sustainable development and poverty reduction.

As a complement to command and control measures, there is a wide range of different types of economic instruments available to policy makers seeking to address environmental problems. These include property rights, market creation, charges, fiscal instruments, liability systems and removal of environmentally harmful subsidies. Properly designed and implemented, these economic instruments can increase the cost of environmentally damaging goods and services, generate financial resources for preserving the environment, improve the efficiency and cost-effectiveness of environmental management, and create financial incentives for sustainable investment.

In 2001, UNEP ETB established the International Working Group on Economic Instruments for Environmental Policymaking comprising 25 experts from governmental, intergovernmental and non-governmental organizations as well as academia from developed and developing countries. The Working Group helps identify ways to enhance policy coordination related to the design and use of economic instruments at the national and international level and assists UNEP in defining its work programme on economic instruments.

Together with the Working Group, UNEP ETB provides practical tools and tailored solutions to policy makers to help them design economic instruments that fit prevailing local economic, political, social, institutional and environmental conditions.

In addition, UNEP ETB is supporting country projects that examine the use of economic instruments in specific sectors in developing countries. These projects are entirely country-driven and involve a national stakeholder process. Based on project experiences and research of the Working Group, UNEP ETB has published a guide on The Use of Economic Instruments in Environmental Policy: Opportunities and Challenges. Drawing on this publication, a training resource manual on the use of economic instruments is currently being developed.

UNEP ETB is also assisting MEA Secretariats and negotiators by promoting the use of economic instruments to meet the specific objectives of MEAs. UNEP ETB has recently published a study on Economic Instruments in Biodiversity-related Multilateral Environmental Agreements that explores the use of economic instruments in the Convention on Biological Diversity (CBD), the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES) and the Ramsar Convention on Wetlands. UNEP ETB will shortly begin to explore the use of economic instruments in other conventions.