Market-based approach to the environment is a way of utilizing policy instruments that use markets, price, and other economic variables to provide incentivesfor polluters to reduce or eliminate negative environmental externalities. Market-based instruments seek to address the market externalities (such as pollution) by incorporating the external cost of production or consumption activities through taxes or charges on processes or products, or by creating property rights and facilitating the establishment of a proxy market for the use of environmental services. Market-based instruments are also referred to aseconomic instruments,price-based instruments,new environmental policy instruments(NEPIs) or new instruments of environmental policy.
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