ABSTRACT
Concepts and definitions In most general terms, an economic instrument (EI) is a policy measure which uses prices and market mechanisms to induce the desired change in the behaviour of
producers and consumers. An EI appeals to the financial self-interest of agents, rather than to their observance of laws and regulations or their response to exhortation or altruism. EIs give agents the freedom to respond in their own ways to incentives. As the previous chapter showed, under certain conditions this produces the ‘optimum’ response from the point of view of public interest.
