1 Market Based Instruments Survey and Assessment Framework Ben Henderson and Kate Norris The views expressed in this paper are those of the authors and do not necessarily represent the views of the Department. DEC Environment and Conservation Economics Section

2 Outline  Aims of the project  Lessons learnt from MBI experience  Evaluation of MBIs  Criteria for successful instruments  Towards an assessment framework

3 Aims of the Project  Literature review of experience with MBIs (many sorts and applications, Australian focus, but worldwide too)  Develop an assessment framework for identifying MBI opportunities and evaluating MBIs

4 Lessons learnt (1)  Uncertainty over price or quantity acceptable?  Diffuse or point source issue?  Complementary regulation, monitoring and enforcement must be strong, penalties high

5 Lessons learnt (2)  Balance between complex and workable  Often hard to implement (environmental objective compromised, not cost-minimising, distributional effects)  Prevent unintended leakages beyond scope (in time, location, pollutant type)  Piloting recommended, evolve over time

6 Evaluation  Before and after – both important  But difficult !  Lack of thorough evaluations

7 Evaluation considerations  Literature agrees - environmentally effective - cost effective - equitable and stakeholder acceptance - harmony with existing frameworks - testing, monitoring and enforcement

8 The Next Stage… towards a framework, identifying opportunities  Aim: to systematically identify and evaluate appropriate MBI opportunities  Use information from the literature review  How to develop the framework? Following are a couple of published examples

9 Pannell’s “Recommended efficient policy mechanisms based on a simple set of rules”. Source: Pannell (2006) Public benefits, private benefits and the choice of policy tool for landuse change ‘policy space’ example

10 efficient options, accounting for lags, learning, benefit-cost ratio>2 ‘policy space’ refined Source: Pannell (2006) Public benefits, private benefits and the choice of policy tool for landuse change

11 Source: Treasury Board of Canada Secretariat at decision tree example Treasury Board of Canada:

12 how would you develop an assessment framework for MBIs?

13 Thanks!