The Use of Economic Instruments in Nordic and Baltic Environmental Policy 2001-2005

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This new report commissioned by the Environment and Finance Group of the Nordic Council of Ministers continues the tradition of reviewing the use of economic instruments in environmental policy in the Nordic countries by providing a comprehensive overview. At the same time, this report extends the country coverage and content of the report. The application of economic instruments is not only discussed for the five Nordic countries, but also for the three Baltic countries. In addition, a discussion on the opportunities and shortcomings associated with the use of economic instruments in the field of environmental policy has been undertaken. The report is a follow-up of the previous five reviews – the last was published in 2002 (TemaNord 2002:581) – and discusses the latest development of the application of economic instruments covering the time period 2001-2005.




Providing a comprehensive definition of economic instruments (EIs) is a difficult and complex task owing to the large and diverse set of policy measures they comprise. Generally, a distinction can be made between market-based instruments (MBIs) and non-market based instruments, also known as regulatory, command and control measures. The main focus of this report is directed at the former. However, the latter are also significant because, in practice, the effectiveness of EIs depends on achieving the right mix of the two, i.e. a policy package combining market-based and non market-based economic instruments.


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