ABSTRACT
The discussion of the merits of using market-based instruments to manage natural and environmental resources gained momentum in the early 1970s. Over the following two decades, policymakers became increasingly receptive to this approach (Stavins 1998). This growing acceptance of the use of market-based instruments was driven by increasing resource scarcity. The level of emission of air and water pollutants started to exceed the ability of the air and water bodies to assimilate these pollutants, demand for water from a variety of sectors of the society started to exceed the available supply, the catch of fish in the oceans started to exceed the available fish stock, and so on. These developments started to have serious consequences for the environment, human health, the survival of species, as well as the ability of the resources to sustain viable industries. The continued survival of many communities dependent on irrigation and fishing came under threat.
