ABSTRACT
This chapter explores the various classes of market-based instruments (MBIs), the extent to which they have been used to promote ecological restoration and the advantages and disadvantages they offer. MBIs have the potential to address this market failure and provide incentives to undertake further restoration work. Instead, the use of MBIs for ecological restoration tends to focus more on factors such as enhancing the cost-effectiveness of the limited pools of funds available for restoration work, the creation of economic incentives to undertake environmentally-beneficial activities and the potential for restoration activities to offset environmental damage elsewhere. The chapter progresses from the simplest forms of MBIs, such as government grants, to the more complex market-based arrangements that can be used to direct payments to the providers of restoration services. From the perspective of those planning restoration projects, tradable offsets represent a potential new source of funding, but it is one that can bring with it a number of challenges.
