ABSTRACT
The market-based approaches (also referred to as incentive-based approaches) work by altering the economic incentives to various private actors (citizens, agriculturists, pastoralists, loggers, users of these services etc.) by allowing them to decide whether and by how much to change their behaviour. They can be categorized based on what they target, i.e. whether they target the price (price-based instruments), quantity (quantitybased instruments) or reduce the market friction by providing more information (market-friction based). Price-based instruments make use of the existing markets to provide incentives to alter the behaviour through taxes, charges, fees, subsidies etc. However, one major disadvantage of the price-based instruments is that although they discourage the usage of the resource through increasing the price of the product, this might not ensure a guaranteed reduction in the usage of the resource.
