Are market-based instruments delivering for Australia?

Market-based instruments (MBIs) have been widely promoted in Australia in recent decades to deliver environmental outcomes at lower cost than traditional policy approaches. Although the use of market-based instruments in Australia has accelerated in recent decades, they are often applied in a piecemeal fashion and not always where they can provide the greatest gains. Others have been misdirected or narrowly applied – giving up the compliance flexibility and cost savings offered by efficient market-based instruments. And some simply have no real incentive force.

Although MBIs have the potential to contribute to efficient regulatory reform, regulatory assessments of MBIs themselves are sometimes sidestepped when politically opportunistic and ignored when not. This paper draws on recent examples to highlight a number of problems with how MBIs are being used in Australia. The paper can be downloaded here.

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