Economic instruments are essential mechanisms of conservation finance as many environmental services and costs are external to private company finances. Economic instruments are efficient means for governments to bring these externalities into market prices. By definition, economic instruments include “fiscal and other economic incentives and disincentives to incorporate environmental costs and benefits into the budgets of households and enterprises” (Glossary of Environment Statistics, UN 1997). They seek to achieve this role of incorporating costs and benefits into budgets through “full-cost pricing” - that is increasing the prices of environmentally harmful products and services and decreasing the costs and prices of positive environmental goods and services.

The OECD Policy Instruments for the Environment (PINE) database includes six categories of policy instruments, five of which are included(*) in this category (OECD, accessed January 10th, 2020).4 Some definitions are adapted from the PINE Glossary.