Applying Economic Instruments in Developing Countries: From Theory to Implementation

This paper proceeds as follows: in the next section we briefly review the experience with the implementation of economic instruments in both OECD countries and developing countries. The types of instruments considered are: pollution taxes/charges, product taxes/charges, deposit-refund schemes, and tradable permits. Also, the related practices of earmarking revenues from EIs and creating specialised environmental funds are considered. In section 3, a general framework is presented for evaluating alternative instruments in terms of their ease of implementation, and in the final section some suggestions are advanced for addressing the more common implementation problems. The question of how environmental policy affects competitiveness in an open economy is also briefly considered.