Environmental pricing reform
Environmental pricing reform is the process of adjusting market prices to include environmental costs and benefits.
An externality exists where a market price omits environmental costs and/or benefits. In such a situation, rational economic decisions can lead to environmental harm, as well as to economic distortions and inefficiencies.
Environmental pricing reform can be economy-wide, or more focused or a particular environmental issue. A "market-based instrument" or "economic instrument for environmental protection" is an individual instance of Environmental Pricing Reform. Examples include green tax-shifting, tradeable pollution permits, or the creation of markets for ecological services.
A similar term, "ecological fiscal reform" differs in more narrowly dealing with fiscal policies as opposed to using non-fiscal regulations to achieve the government's environmental goals.
