Market Mechanisms

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Left to their own, markets often fail to account for environmental and social costs in prices. As such, unsustainable goods retain an artificial cost advantage that can discourage efforts to scale up green investments and make it difficult for green sectors to compete.

Market mechanisms have become a common policy tool to correct for these externalities and internalise the full range of costs and benefits. It is seen as a cost-effective way to achieve the Sustainable Development Goals (SDG), especially around issues of climate mitigation (SDG 13) and biodiversity protection (SDG 15). Market-based instruments such as tradable permits (cap-and-trade schemes, for example) serve to level the playing field and provide incentives to promote the greening of key sectors. Similarly, markets for the payments of ecosystem services, including carbon sequestration, aim to promote sustainable land use decisions by enabling landowners to capture the value these ecosystem services provide.

Projects

Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH
Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH, Partnership for Action on Green Economy (PAGE), United Nations Environment Programme (UNEP), International Labour Organization (ILO), United Nations Development Programme (UNDP), United Nations Industrial Development Organisation (UNIDO), United Nations Institute for Training and Research (UNITAR)

Learning Products

World Bank, Korea Green Growth Partnership (KGGP)
Smith School of Enterprise and the Environment (SSEE), University of Oxford
CAFTA-DR Environmental Cooperation

Batumi Initiative on Green Economy (BIG-E)

Insights

Juliano Assunção and Joana Chiavari from the Climate Policy Initiative discuss a new study exploring paths to more efficient land use in Brazil.
Nathalie Girouard, Head of the Environmental Performance and Information Division Environment Directorate at the OECD, discusses the findings from their new report "Towards Green Growth? Tracking Progress".
In this "Insights" blog post, the World Bank looks at what it would take to decarbonize the world economy by 2100 in a way that is compatible with countries’ broader development goals.