Environment in emerging and transition economies

Economic Instruments


This work aims to assist countries of Eastern Europe, Caucasus and Central Asia (EECCA) in more effective implementation of the Polluter-Pays Principle by re-designing their economic instruments for environmental protection in line with their appropriate functions.

A comprehensive review of the system of economic instruments for environmental protection in EECCA and demonstration projects in Russia and Armenia (2003-2005) resulted in recommendations on how to eliminate the most obvious flaws in EECCA countries’ existing pollution charge systems and increase their incentive impact.

In 2009-2010, the Environmental Action Programme (EAP) Task Force worked on reforming administrative monetary penalties (fines) – the most widespread environmental enforcement instrument in EECCA countries and internationally, intended both to punish non-compliance and prevent its future re-occurrence. It developed a guidance document on the determination and application of administrative fines for environmental offences and conducted a case study in Azerbaijan which focused on the calculation of economic benefit of non-compliance and its removal through an appropriate monetary penalty.

In 2011-2012, the EAP Task Force Secretariat developed a policy paper on environmental liability for damage to natural resources. Environmental liability is one of the means of making polluters pay for preventing, remediating or compensating environmental damage they cause. The paper provided recommendations for EECCA countries to re-focus their environmental liability regimes on environmental remediation, consistent with international practices.

Starting in 2013, the work of the EAP Task Force in this area has been focused on economic instruments for the management of environmentally harmful products. The Secretariat has developed a Policy Manual on the design and implementation of such instruments as product taxes and their environmental differentiation, deposit-refund systems and enhanced producer responsibility schemes. Pilot projects on product-related economic instruments are being carried out in Moldova and Ukraine.

Creating Market Incentives for Greener Products - Roadmap for Policy Action 

Main findings

In developing such instruments, governments should:
- Set clear policy objectives in terms of inducing positive changes in the behaviour of producers and consumers.
- Match instruments and products prudently to ensure that the selected instruments are capable of achieving the desired environmental improvements.
- Target a small number of product categories with carefully designed instruments in order to maximise their behavioural impact.
- Thoroughly assess the wider potential impact of each instrument on public administration and budgets, business and consumers, and the overall functioning of the market economy.
- Engage a broad range of stakeholders - ministries of environment, economy and finance, as well as the business community, non-governmental and academic institutions – in designing the instruments and overseeing their implementation.

The Policy Manual “Creating Market Incentives for Greener Products” was developed within the framework of the “Greening Economies in the Eastern Neighbourhood” (EaP GREEN) programme which is principally funded by the European Union and implemented by the OECD in partnership with the UNEP, UNIDO and UNECE. 


 Related links

  • Environment in emerging and transition economies



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