Economic instruments provide important market signals that can influence the behaviour of producers and consumers. They can incorporate environmental costs and benefits into the budgets of firms and households, by increasing (or decreasing) the price of a product or service. Compared to more traditional command-and-control instruments, economic instruments can be a more effective and cost-efficient way to achieve environmental goals, such as conserving and sustainably using biodiversity, fighting air pollution and mitigating climate change.

Tradable permit schemes (also referred to as cap-and-trade) are economic instruments used to allocate emissions or resource exploitation rights. They are increasingly used around the world to help achieve policy objectives in reducing over-exploitation of fisheries, mitigating climate change or water scarcity. Tradable permits are most frequently allocated for free (i.e. grandfathered) to individual resource users or (polluting) firms. If tradable permits are auctioned, they generate revenue and therefore mobilise finance that can be used for a variety of purposes.

This indicator measures the number of countries using biodiversity-relevant tradable permit schemes.

Brief background/history of development

The OECD started developing the database on Policy Instruments for the Environment (PINE) in the 1980’s and the database has gradually been expanding over time as more countries provide information. Today, the OECD PINE database includes information on six types of policy instruments relevant to the environment and natural resource management in 109 countries. The database contains more than 3 500 instruments, of which more than 2 800 are in force. Each instrument in the PINE database is tagged with one or more of the environmental domains it aims to address: air pollution, biodiversity (covering terrestrial, marine/ocean and aquatic ecosystems), oceans, climate change, land management, transport, water pollution, etc.