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Role of Economic Instruments in Managing the Environment

Industry Commission staff research paper

This paper was released on 11 July 1997.

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Economic Instruments Complement Other Environmental Protection Measures

 

Economic instruments, such as levies/charges and tradeable permits, when used appropriately can entail least cost solutions to environmental problems, provide greater flexibility and encourage innovation. Economic instruments can be used on their own or in combination with other measures to improve the efficiency of environmental protection efforts, according to a staff research report released today by the Industry Commission.

The report, Role of Economic Instruments in Managing the Environment, reviews the application of a number of economic instruments to key environmental problems in Australia and examines areas where the use of such instruments could be extended.

In addressing key environmental issues such as native vegetation retention and dryland salinity, the report explores the scope for extending the use of economic instruments. Expanding the use of management agreements and conservation covenants to protect native vegetation and the possibility of extending the salt credits scheme currently operating in irrigation areas to dryland areas are some of the options canvassed in the report.

At present, Commonwealth, State and local governments use economic instruments such as effluent charges, load based licensing schemes, performance bonds and tradeable permit schemes to address a number of environmental problems associated with air, water and land.

The report highlights the need for obtaining adequate information about key environmental problems and developing effective mechanisms to monitor and evaluate measures used to address these problems. It argues that effective implementation of incentive based mechanisms to address environmental problems requires devolving responsibility and authority to the lowest practical level.

Background information

Leonora Nicol (Media, Publications and Web) 02 6240 3239 / 0417 665 443

Preliminaries
Copyright, Acknowledgments, Contents, Abbreviations, Glossary, Summary

1 Introduction
1.1 Policy framework
1.2 Objectives of the study
1.3 Structure of the report

2 Instruments for environmental policy
2.1 Rationale for government intervention
2.2 Main instruments for environmental policy
2.3 Closer look at economic instruments
2.4 Issues in the choice of instruments

3 Current use of economic instruments
3.1 Use of economic instruments
3.2 Factors limiting the use of economic instruments

4 Two case studies: Native vegetation retention and dryland salinity
4.1 Case study 1: Native vegetation retention
4.2 Case study 2: Dryland salinity

5 Extending the use of economic instruments
5.1 Atmosphere
5.2 Inland waters
5.3 Coastal environment and the sea
5.4 Land resources
5.5 Biodiversity

6 Role of stakeholders
6.1 Role of government
6.2 Role of industry and community groups
6.3 Required policy changes
6.4 Agenda for the extension of economic instruments

7 Concluding remarks

References

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