ABSTRACT
From a policy perspective, it has been suggested that traditional approaches to natural resource conservation—whether based on regulation, public participation or the establishment of reserves—are inflexible, costly and economically inefficient (Elliot, 1994; Whitten et al, 2003). Market-based instruments (MBIs) have been put forward as alternatives that offer governments and resource users the opportunity not only to add to their selection of policy tools, but to address what is considered by proponents the root cause of environmental degradation, market failure. By allowing market mechanisms to determine conservation outcomes it is argued that these may be achieved at significantly lower cost than traditional approaches while simultaneously promoting productivity and innovation. MBIs are designed to help resource users absorb the costs of environmental protection at the same time as providing more cost effective and targeted delivery of government funding. In light of trends towards ‘shrinking government funding and reductions in many of the services traditionally provided by government’ (Morgans, 1996, p100)—not to mention the sheer temporal and spatial magnitude of many environmental problems—any potential for cost-effective intervention must be considered attractive. MBIs are thus seen by many governments and government agencies as the ‘policy frontier’ (e.g. Cutbush, 2006) and they have been applied to issues as diverse as greenhouse gas abatement, salinity mitigation, catchment protection, water allocation, native vegetation management and, importantly, biodiversity.
