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This article has been written by Himanshi Patwa.


Statement of Problem

Man has always been irresponsibly anxious to achieve rapid economic development and growth, resultant to which there comes along a host of environmental problems. These problems have caused an alarming effect on human life as well as life on the earth. This alarming situation has resulted into the serious thought on environment friendly models of development. 

In a developing and democratic processing country like India, the roles of Industries and the government for introducing Market Based Instruments and formulating policies for the same. There have been various directions laid down in international schemes and treaties to have a sustainable development and promote eco-friendly ways of development in the country. The government has been promoting some Market Based Instruments for the protection of the environment. But there is a gap between the scope of the policies and its implementation.

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The concept of Green Procurement scheme and Eco Taxation have been well known for the sustainable development in developing countries like India. The policies framed for the achievement of such goals are sufficient, but the implementation has not yet been effective.

Review of Literature

The Article titled ‘Recent Developments in Environmental Protection in India: Pollution Controlby Har Govan is regarding the various factors that are responsible for the environment degradation and there has been an identification of the work that they have been essentially carried out for the control of the same. There are various tools and strategies identified by the government recently and there has been a considerable change. The country’s courts have started developing and the environmental activists have played an important role for the same.

The Article titled “Environmental Taxation In India: Need for Green Fiscal Reform for A Sustainable Futureby Paridhi Poddar is an economic environmental approach, where the environmental taxation concept is explained. The scope of the entire concept, along with the advantages and disadvantages are explained. The present policies in India have been a great help for the implementation of the concept.

The Article titled ‘Managing Pollution: PIL as Indirect Market-Based Tool by Aparna Sawhney is regarding Environmental public interest litigation and the resultant judicial activism in India during the late 1980s and 1990s have played the role of indirect market-based instruments of pollution management. While a purely judicial approach to environmental management is neither effective nor efficient, PIL has played a significant role in defining India’s pollution management system.

The Article titled ‘Comparing the cost effectiveness of market-based policy instruments versus regulation: the case of emission trading in an integrated steel plant in India by Rita Pandey & Geetesh Bhardwaj regarding Cost-effective policies allow for minimizing the compliance costs associated with reaching a desired environmental quality target. 

The model incorporates the number of emission sources, the concentration of pollutants emitted at each source, the marginal cost of abatement for each source, the transfer coefficient that relates emission at each source with the impact on ambient air quality, and the desired ambient air quality target. The model is applied to an integrated steel plant in India.

The Article titled ‘A Review of Market Based Instruments For Pollution Control: Implications for India by Aparna Sawhney regarding the externalities on the environment and they lead to harmful effects on the services. The resulting pollution is greater than what is socially desirable and it goes beyond the threshold. To control this, there are many tools and strategies, out of which Market Based Instruments is an important aspect for a developing country like India.

The Article titled ‘Environmental policy and market structure by Chowdhury & Indrani Roy is regarding the intersection of two of the most active and interesting sub-disciplines of economics, environmental economics and industrial organization. The economy and the environment are intrinsically linked to each other in different ways. 

All these phenomena have driven home the message that the environment is a scarce resource and that environmental degradation poses a serious threat to the present and future generations and have serious socio-economic implications, especially for the underdeveloped countries. Given that much of economics deals with the allocation of scarce resources, it is only natural that people turn to economics for a better understanding of environmental problems.

The Article titled ‘Green policies and sustainable development in Kerala since 1980 by Vallabhan and TV Murali is regarding the review of the policies that have started evolving throughout the different Market Based Instruments and through that the aim to achieve development and stabilize it.


The dissertation tries to attempt a study of the interrelationship of political, environmental and economical factors. This interrelationship has brought into the concept of sustainable development and resultant to that the government has introduced various schemes for the development along with environment protection. The one of the important tools is Policy Market Based Instruments. Sustainable development has become an imperative objective for all countries over the world. So, the Market Based Instruments have been an essential part of sustainable development.

The first objective of the study is to analyze and study the concept and scope of  market based instruments that are prevalent in light of the concept fair development.

The second objective of the study is to assess the gap between the scope of the policies formulated by the government and the implementation of the same in India.

The third objective is to point out the impact of the policies formulated and the point of conflict that creates the gap for the implementation of the policies and achievement of goals.


The government has been the prime agency in the framing and formulating of the policies that are for the environment protection and sustainable development and the Market Based Instruments have been an important tool for the implementation of the Green Schemes. The implementation of the policies of Green Procurement and Eco Taxation has not been done fully in India. There is a wider scope of the implementation of the policies.

Research Questions

  1. Whether the government has framed the policies for Market Based Instruments for environmental protection?
  2. Whether the policies of Green Procurement and Eco Taxation implemented in India?


The specific methods used in the study are historical and analytical. The historical approach involves the evolution of the concepts and policies regarding the Market Based Instruments for the promotion of the idea of Sustainable Development and Environment Protection. The analytical method includes the study of the Instruments Policies and their context and scope. It further analyses the implementation of the policies and the conflict that leads to its ineffective implementation.

The methodology adopted is a doctrinal approach, where the secondary sources of data of various schemes, treaties, policies and statutory framework and a comparative analysis of the scope and implementation of the same is further done. The methodology is analytical study of secondary documents like books, journals, articles, research papers.

Market Based Instruments: meaning and scope

 Meaning of Market Based Instruments

The Market Based Instruments are policy instruments that use market price, and other economic variables to provide incentives to the polluters to reduce or eliminate negative environmental externalities. We are in that fast pacing era, where we need development at the highest speed to keep in pace with the outer world, but at the same time, it is very essential to look into the matter of environment and related aspects. 

We cannot afford to have development at the cost of the degradation of the environment.  Even the Rio Declaration, in its Principle 12 emphasis on the idea of Sustainable Development. But the implementation of the idea of Sustainable Development has been a bit difficult for a developing country like India. And hence, there must be strategic formulation for the overall look of the protection of the environment. The government has tried a multiple approach for the same purpose, but an important aspect is regarding the regulating the market of such goods.

Types of Market Based Instruments

For the Purpose of Taxonomy and Convenience

The main idea behind the concept of Market Based Instruments is to follow the taxonomy, and hence by some scholars, the Market Based Instruments are categorized into two:

Direct Market Based Instruments:

The instruments or the tools that can directly deal with the pollutants and can measure it, would be regarded as Direct Market Based Instruments. Mainly, three such instruments are included:

  1. Emission/Effluent Charges: The government would observe the quality of environment degraded due to discharge of waste. This is a relative grading done in comparison to the normal degradation caused to the environment, and then the charges are fixed accordingly. 
  2. Tradable Permit System: The government determines a target level of quality of environment and then permits the discharge of different particles in the environment. The permit rate of different particles are different as per the impact of the particle on the environment. Thus, the particles can be discharged only by the permit.
  3. Deposit Refund System: The consumer is the end user of any product, due to which pollution is caused, and hence, the consumer deposits a certain amount for consuming that product, which would be higher than the labelled price. Whenever the consumer gives back the product after use for proper recycling or restoration, the deposit is returned back to the consumer. Hence, this mechanism imposes a responsibility on the consumer as well.

Indirect Market Based Instruments

The instruments or the ways by which the direct degradation cannot be ascertained, but instead, it is indirect and hence, the goods or the product are measured. Those are:

  1. Product Charges or Differential tax Charges: Whenever, in the product, additional charges are added with regards to the consumption, recycling or disposal of that product, which affects the environment directly, it is the product or differential charge. This would make the consumers switch to sustainable alternatives.
  2. User and Administrative Charge: The overall consuming people, that is the society at the whole pays a charge, as a fee for the discharge of the wastes and the effective way that does not cause harmful impact on the environment. This would help in ensuring that everyone consuming the products carry the burden of the disposing and recycling of the products.
  3. Subsidies for Substitute and Abatement Inputs: the government would provide incentives for the setting up of the plants that discharges less pollutants as compared to a standard industry. This would promote the sustainable development and encourage people in discovering the substitute of polluting elements and promote the substitutes.
  4. Enforcement Incentives: These are the negative kind of incentives, where the rules and standard as prescribed by the government are not followed, and more discharge of it is done, then the government may levy fine or fees  or may even take any legal action.
  5. Suasive Instruments: This is mainly regarding educating people and showing them the purpose for imposing the Market Policies for Environment Protection, and this will voluntarily make people to help the government. This would be a voluntary agreement signed by people to lessen pollution and pollutants. This would also include awareness at a large platform for the same.

For the Purpose of Sustainability

After the idea of Sustainable development was communicated in the Rio Declaration, many governments adopted for the sustainable plans of the development and hence, based on that the Market Based Instruments are divided into three:

Price Based Instruments

The government would take into account the environmental costs and social costs and in accordance to that, they would fix the price of the goods or service. This would be in both the ways, the goods or services impacting the environment in a negative way, then the price would be higher, whereas if the goods are not causing any harm to the environment, the cost would be less or the government may even provide subsidies to promote such goods and services.

Rights Based Instruments 

The government would determine a limit of the discharging the polluting affluents, based upon the quality of environment. These rights can be traded between the discharging entities with the consent of government along with an amount of fee attached to it. This would enable to discharge more affluent based as per the price at which the person discharging less affluent is willing to give.

Market Friction Reduction Instruments

The government tries to educate and make aware people regarding the environment degradation issues and based on that, the goods that are demanded at large by the public, they are opted for an eco-friendly approach and this would help in promoting a sustainable development concept. 

Scope of the Market Based Instruments

The market Based Instruments are a strategy formulated by the government, with a view of sustainable development and protecting the environment. This is taken in view, with the objective that in the present era, the implementation of schemes of Sustainable Development would be delayed as there are plants that are already working on and the economy survives on the income of that. 

Shutting down such industries all of a sudden, would bring the economy at a stand still and hence, till the time such innovations are discovered simultaneously and the economy runs smoothly, there has to be steps taken by the government, that would not degrade the environment at an irrecoverable level.  Thus, such policies that would help in promoting the green environment and an idea of saving the environment from further degradation, in both ways by financial and non financial ways, would be included in Market Based Instruments. 

Thus, Market Based Instruments are a complement to the regulatory control and command policies. The main idea behind this is that, when things are imposed on the public, it might not be necessarily followed, and hence there is a need of awareness of environment degradation and its impact to the public in general. 

Also, the industries generating such kind of pollution, should limit their discharge and hence it would help in lessening the degradation caused to the environment. Whenever, there has to be a decision by the government for the formulating of such policy, the choice should be made in accordance with the nature of the country and the various factors should be taken into account. 

There are the strategies for adopting the Market Based Instruments in different ways and all of them should be considered in this regard. For example; if a goods or service is having a good demand and market, then the government can add the discharge price in the product and hence, that would be effective. 

On the other hand, the industries that are very small scale, and not discharging pollutants at that level, then they should not be interfered with. Hence, the scope of the Market Based Instruments depends as per the factors regarding the various things taken into account and the economy in which it has to be adopted. Thus, the scope not only includes the industries, but also extends to the consumers consuming the product as well as the people at large and till the government who formulate the strategies of further development. 

Advantages of Market Based Instruments over Command And Control measures

The Market Based Instruments are a complement to the Command and Control Measures. Command and Control measure means that there is a regulation that governs the industry, and upon that the terms of legality and illegality is decided. Market Based Instruments are the policies, which are imposed by the government after the scrutiny of specific performance by the industry, consumers or the public at large. It has been derived that Market Based Instruments are cheaper and easy to implement as compared to the Command and Control Mechanisms. 

Thus, the goals to be achieved by the Market Based Instruments are cost-efficient as well as environment efficient. Also, it takes into account the price factor, which directly affects the sale of the product.  They provide flexibility like emission permits which are tradable, thus if one of the industries is emitting less than the determined level, it can sell to another industry. 

This provides flexibility even to the industries and due to the flexibility provided, it can be implemented in a better way. As in contradictory to the Command and Control Based Mechanisms, Market Based Instruments does not only help in reducing the degradation of the environment or the harm caused to the environment, but also helps in technological innovations, which would be very helpful in a betterment of the quality of the environment. 

There has been an empirical study that shows that in different countries, wherever the economic instruments are used, they are more efficient than the command and control mechanism, in terms of implementation and also in terms of the effect on the environment. Even when the command and control mechanisms are formed, they are formed on the basis of the data available in consent to the technology available. Along with that, the data gets outdated with time and on, but the same norms and mechanisms prevail and hence, it does not help in controlling the situation in the control of environmental degradation.

There are many positive aspects for the implementation of the Market based Instruments, but we also cannot discard the dark side or the limitations of the Market Based Instruments. As earlier mentioned, the Market Based Instruments are a tool to be implemented till the time the country is fully developed and ready with such technological innovations that would help the country to achieve sustainable development and there would be no degradation in the quality of environment. 

The Market Based Instruments could be effective where there is not an alarming situation regarding the situation of the environment. If there is an emergency regarding the environment aspect, then the Market Based Instruments cannot help in improving the quality of environment at such a pace, it can just help in maintaining the quality of environment or save it from further degradation. Even, the monitoring costs of the policies like emission trading and tradable permits are very high, and thus cannot be supplied to each and every place and hence, some areas and industries are left out and this degrades the overall quality of the environment. 

Such policies that charge the consumers for the discharge of such goods, would increase the cost and hence the cost of the alternatives decrease, and the consumption of alternative goods increase and hence that would affect the quality of environment. The policies framed regulating the discharge of the pollutant affluents by the industries, might even make the industries to discharge the waste illegally and that may in turn be more harmful to human life and the environment as well. 

Thus, the main role for the implementation of the Market Based Instruments depends upon the choice of the instruments that the government has decided to implement, depending upon the various factors and limitations. Every Market Based Instrument will have its limitations as well but the best suited Instruments are to be implemented for the problems. Thus, the next chapters are about Green Procurement Scheme and Taxonomy, and its implementation and analysis taking into consideration Indian Scenario.

Analysis of Green Procurement Scheme

Meaning of the Green Procurement Scheme 

The Green Public Procurement or the Green Procurement Scheme, is a way of the authorities would secure goods that would affect the environment in a lesser way in the entire life cycle as compared to the primary ordinary products produced. Thus, the government has formulated this scheme for the production of goods that are less harmful to the environment. If the goods are produced in the ecological way, then even the production waste can be controlled. The production as well as the discharge cost as well as the degradation can be lessened. 

Thus, this is conservatism approach implemented, which would yield results over a long period of time. Even the consumer’s concern regarding the environment has been increasing and due to that there has been found that there has been a positive response to it. Green Public Procurement, is a range of policies that ensure the environment considerations and also implements it at the national and state level. This would help in the purchase process of the goods and hence lessen the degradation of quality of environment. 

The main advantages of implementing such a Green Procurement Scheme is that firstly it is cost-effective and has easy implementation. Further, also that, it saves money of the discharge of waste, as it is a reusable or recyclable product. It reduces the amount of hazardous waste produced and also reducing the emitting of hazardous gases and even boosts up the competitiveness in the eco industry, leading to better innovations and technological reach of such objects or goods and services. Moreover, it conserves the natural resources, which is the ultimate goal of the concept of Sustainable Development. 

Contrary to this, there are also the limitations that the implementation of Green Procurement Scheme can face. Firstly, when the Green Procurement Schemes are to be implemented, as they are very new and innovative, the price of the goods may go high as it is experimenting and exploring the market. Also, the firms must be ready to work accordingly, if the producing firms are not confident about this idea of green goods, the entire policy would fail. 

Also, there is not specific knowledge regarding this aspect available easily, so even the idea of technological innovations and green goods do not work out.  Even if the other factors work out, the availability of the goods would be an issue, where the goods would not be available to each and every person, and hence, the idea of waste reduction fails. The last and the major drawback is the psychology of people. The people do not want to change and that habit would not let this be a success in order to lessen the environmental degradation. 

Guidelines for Green Procurement Scheme in India

The Scheme of Green Procurement in India was adopted from the policy of Japan. The main issue discussed was regarding what goods should be made initially, which would be helpful in the implementation of this scheme. The simple answer decided was that consumer goods that are consumed regularly and has a good sales rate should be converted to green goods to have its impact in the society. Hence, the MoEF decided that the ‘daily use’ products would be firstly converted into green products.

But after this, the Guidelines issued regarding the selection of products for the same are product categories, whose standards are already developed, so that the people trust the standard of that product and there would not be much hesitation by the consumers to consume that product which is the new green product. The second suggestion was that the manufacturers, who already have the production of eco-friendly products and are accustomed to the production of such products should be included for the reason of cost-cutting and better quality of products. 

The most important thing laid down was that the production of such goods should be done, which have a high value, in terms of quantity and value, so that the majority of the goods can be eliminated that produce pollutants that degrade the quality of the environment. 

Thus, there were changes made to many products that have contributed in controlling the degradation of the quality of the environment. Thus, the MoEF provided that as the concept of Green Procurement is totally new for the country and so the work of its implementation has to be done harmoniously along with taking into consideration that there is a varied functioning of different organizations required, hence, the means to be adopted would by online consultations, meetings and propaganda by awareness to all the people. 

The Externals sources to implement these means would be the companies, associations, firms and the relevant ministries, that would impose such guidelines and would decide who would follow the guidelines as in the given form and who all will be exempted. The internal sources to aid would be the core group, IGBC, GBC, etc. who would decide the next step of implementation, looking at the present scenario. Further, it was also guided to adopt a product based approach, where the first concern was to focus on the key issues regarding the environment; which would mainly be related to climate change and sustainable resource use and allocation. 

The second step would be building on the existing policy instruments, which would be figuring out what all exists for this cause, and hence, where is the gap which hinders the achievement of the objective and lastly, the proposing policy, where what kind of system should be adopted for meeting the quality of the environment and how to adopt new policies and how to assess the gap. Thus, these guidelines are the raw guidelines formed for the first implementation of the Green Procurement Scheme. The guidelines would change as and how the scenario of the society changes and that helps in improving the quality of the environment.

 Assessing the Policy of Green Procurement

The Green Procurement Policy helps in the reduction of consumption of resources, utilities, energy and avoids the generation of non-biodegradable waste and increases the innovation and transparency cost. This purchasing is influencing the market. The promotion of such products would help the authorities in granting real incentives to the industries producing green products, technologies and materials. 

Also, it encourages eco-innovation and would be very helpful in the swing of ‘Make In India’. The concept of Green Procurement is based on the idea of Pollution Prevention, and thus it is an effort to eliminate the harmful and hazardous and toxic waste produced. Everyone, consumers, corporates, industries, governments have accepted that there is an urgency to maintain the quality of the environment and rather enhance it. 

Thus, Green Procurement helps in the easy implementation of the goal and its achievement. Green products are generally produced in a manner that consumes less natural resources or uses them more sustainably, as with sustainable forestry. They may involve less energy in their manufacture and may consume less energy when being used, and they generally contain fewer hazardous or toxic materials. 

The Public Policy of Green Procurement can be implemented only when the risks are identified, then based upon the risks, the technical innovations are needed. Then, there has to be selection based on the criteria which needs enforcement of different instruments as per the criteria. It has been observed that the implementation of the policy has been done in India, even there has been good response from the market regarding the green products, but the main concern is regarding the cost-effectiveness of the product. 

There has not been much awareness regarding the green products and also the supply of the products is insufficient even at the places where the people can afford it. Thus, as these are just policies, without any legal backing, there is no specific punishment attached to the same. There are only fines payable, where the industries do not adhere to the guidelines and hence, it faces the lacuna there. The key goods are focussed, the paperless transactions are taking place, even the papers are recyclable, the toilets are started being biodegradable, even hydro plants have come up. The railways have started recyclable bottles and have started using more efficient and eco-friendly options in terms of fuel used.

Every industry has started implementing such things; everything is either recyclable or biodegradable: the world has gone paperless, even the papers available are recyclable, the computers and laptops and mobile phones are made in such a way that they can be recycled and can be converted into something else and hence, it would help in taking care regarding this aspect and hence, the waste can be lessened. Even the pharmaceutical waste is such that it can be biodegradable and hence, the waste can be lessened and that would automatically help us in upgrading the quality of the environment.  

For a fruitful implementation of the Green Procurement Policy, it is very necessary to have organisational support. Not only the industries and the firms who have to follow it, but also the authorities that are responsible for the implementation of such policies. There should be a self-evaluation by every person and the industries whether they are adhering to the prescribed guidelines and rules set. 

The goals should be determined and should be supervised and revised on a timely basis. Also, the strategy to achieve such goals should be laid out and the strategy should be followed by everyone. The strategy should be further held up for a pilot project and the project must be designed and implemented in a strict sense. After the implementation is done, it should be assessed whether there is any sustenance in the environment or not and should be revised respectively. 

Environment Taxation In India

History And Global Developments in Environment Taxation

The most basic and the most known Market Based Instrument is Environment Tax. In the simple context, taxes are anything that is imposed by the government which are to paid irrespective of the fact that those goods are used or services are availed. The base of an environmental tax is a physical unit (or a proxy of it) of something that has a proven specific negative impact on the environment – pollutants or on goods, the use of which produces such pollutants. 

Environmental taxation is an idea of imposing a duty on the goods and activities, which are responsible for the pollution or degradation of the environment and the goal is of internalising such externalities. The idea of environment taxation was firstly made viable in the Rio Declaration, where it was stated that to internalise the issues related to the environment, the costs should be internalised along with the goods and services. It was further inserted in various other conferences and treaties like these relating to the environment, including the United Nations Environment Programme’s (UNEP) Green Economy Report, OECD and European Environment Agency. Thus, as and forth, this was introduced in the different countries and now is the most commonly known tool of Market Based Instrument. 

Considerations for deriving the policies and advantages of environment taxation

There are a number of factors to be taken into consideration for designing the appropriate tax matter. The design and nature of the tax should be made while taking into account the types of goods used, the present quality of the environment. The main factor that should be considered is the industries that cause this kind of pollution and based on that the steps should be taken. Also, the potential industries, who could emit such gases, would be taxed and hence, this would encourage the industries to adopt more sophasictel technology. 

The rate of the tax should be kept as Optimal as that would help in the implementation of the strategy and achievement of the objectives. The Optimal Rates would help in reducing the pollutants and also help in increasing the quality of environment. Also, if the rate of tax is kept less than the Optimal rate or excess to optimal rate, it does not help in achieving the objectives. The Question of Choice of the type of tax is one of the most important considerations, and hence, it should be taken into account prima facie. The choice of such a tax is to be considered only after impact analysis. 

The aspect of equity is also to be considered. The last and most important aspect is the Administration and Implementation of such eco taxes. The administrative bodies and the authorities should be chosen very specifically. All the different legal, economic, financial and other aspects must be considered and hence, it is inevitable that all these considerations must be taken into account while framing such taxes. 

The fact that the Eco Taxation should be used as compared to other alternative Instruments, the advantages are that firstly taxation is an incentive, if the usage of the polluting machinery is not stopped, the government will impose tax and hence, the industry would get a lesser revenue. Hence, it would adopt a new ecological system of production. 

Secondly, the environment taxing would help in making people aware regarding the various harmful effects of such products and hence, that would be a lesson for the industries who are not even taxed, to stick to eco friendly options. Thus, when the fines are imposed then the industries would refrain from paying such hefty amounts and hence, it would be helpful in achieving the objectives. On the other hand, the command and control mechanism takes a long time in grievance redressal.

Eco Taxation in India and Conflicts

The Green Taxation is a concept that was found in India in the 1990s, due to the treaties and conferences and it is the most basic kind of technology adopted at the earliest by the country. The first resolution of the Tax Committee in 1992 had proposed regarding such taxation. 

The National Environment Policy of 2006, also an emphasis this aspect regarding the importance of environmental taxing in India and environmental regulation. Even before that, in the Water Act, 1974, the cess was collected from the industries polluting the water bodies, and thus gave the power to the government to regulate this and the government can collect fines from such industries. 

There are similar provisions under the Air (Prevention and Control of Pollution) Act, 1981. Further the government has also emphasized on clean energy production of the energy and inclusion of recycling costs on the industries itself. But, still there are conflicts in imposing and implementing such taxes and the challenges faced for it are, there is a need for a complete tax regime, where the planning is not done till top. There are many lacunas faced by such taxes and hence, the industrialists escape from the taxes and hence, the objectives are not achieved. 

The government should be able to predict the ways and means of the industrialists that they would violate the policies and thus, the loopholes should be covered and also the illegal disposal of such wastes should not take place. The policies are to be imposed in all the states and nation wide, and hence there should be uniformity in the making as well as implementation of the policies. Such taxes sometimes even conflict with the subsidies given for the promotion and development for some areas. This is a very serious matter and hence, it should be dealt with utmost care. 

The revenues generated from such taxes should be used only for the betterment of the technologies and achievement of objectives. The institution cooperation plays an important role and hence the ministries, authorities and such institutions should unite and then the objective can be achieved. It has been significant that Taxation is a very useful instrument and hence, it should be implemented with care and caution to get the best results and achievement of objectives.

Conclusion and recommendations

The concept of Sustainable Development has been adopted by every of the countries and all have acknowledged the intricacies of the degrading quality of environment. The execution of a full-fledged sustainable development concept is only possible when the parts are put in place and executed and experimented. 

The Market Based Instruments are a perfect tool for the same. It is necessary that the policies framed and revised on time being and need arises would be of great help and would enable us to keep up pace with the actual status. Thus, the Market Based Instruments help to great extent for the maintaining the quality of the environment. But, it is established fact that only the Market Based Instruments alone cannot help out in improving the conditions, there must be some urgent steps taken along. The Market Based Instruments can only provide supplements for it. It is doubtful that the mechanisms discussed here will prevent all forms of pressure on the environment.

Yet, where public-sector resources are dwarfed by commercial ones, the market-based approach is vital, and we should carefully work to develop market-based tools that blend economic, social and environmental values. There would always be risk and obstacles in following and implementing new ideas, but always the best idea with the least of the limitations has to be chosen. 

The implementation of the system should be well regulated and sorted and the person implementing it must have clarity in the mind. Always, it is not clear that what kind of Market Based Instrument should be actually imposed and formulated, and for that purpose, there must be an evidence-based study, where firstly there is experimentation on a smaller unit and then it is to be brought into action in a bigger unit. 

The objectives must be wide and multiple and that must try and resolve as many as such regarding the environment quickly and efficiently. The uncertainties, liabilities and limitations must be forecasted and steps accordingly shall be taken. The evaluation of the impact of the implemented Market Based Instruments should be done regularly and accordingly, they should be revised. 

Also, more innovation on the technological side should be encouraged and other instruments should also be used for effective achievement of the objectives of preventing the degradation of the environment.

Bibliography and References

Articles Referred

  • Har Govind, Recent Developments in Environmental Protection in India: Pollution Control
  •  Ambio, Vol. 18, No. 8 (1989), pp. 429-433.
  • Paridhi Poddar, Environmental Taxation In India: Need for Green Fiscal Reform for A Sustainable Future, SCC Online, 4.2 NLUJ LR (2017) 1.
  • Aparna Sawhney, Managing Pollution: PIL as Indirect Market-Based Tool,  Economic and Political Weekly, Vol. 38, No. 1 (Jan. 4-10, 2003), pp. 32-37.
  • Rita Pandey & Geetesh Bhardwaj, Comparing the cost effectiveness of market-based policy instruments versus regulation: the case of emission trading in an integrated steel plant in India, 9 Environment and Development Economics, 107–122 (2004).
  • Romain Pirard, Market-based instruments for biodiversity and ecosystem services: A lexicon, Vol. 19–20, Environmental Science & Policy, Pages 59-68 (2012).
  • Aparna Sawhney, A Review of Market Based Instruments For Pollution Control: Implications for India, Researchgate, (Jan.2019).
  • Chowdhury, Indrani Roy, Environmental policy and market structure, Shodhganga (Jun. 2014).
  • Vallabhan, T V Murali, Green policies and sustainable development in Kerala since 1980, Shodhganga (Aug. 2010).
  • Charles E. Di Leva, The Conservation of Nature and Natural Resources through Legal and Market-Based Instruments, 11 Rev. Eur. Comp. & Int’l Envtl. L. 84 (2002).
  • Jacqueline Cottrell, Environment Tax Reform In Developing, Emerging and Transition Economies, German Development Institute, (Mar.27, 2020, 12:23 PM)
  • Organisation for Economic Cooperation And Development, Glossary of Statistical Terms: Environmentally Related Taxes 2004,  (Apr. 06, 2020, 10:23 PM)


  • Niti Aayog, Annual report 2019-2020.
  • Market Based Instruments for Environment Protection and Management by INTOSAI.
  • Green Procurement Guidelines by National Academy of Indian Railways.
  • The OECD Report on Regulatory Reform by  Organisation for Economic Cooperation and Development Paris, 1997. 

International Treaties

  • Rio Declaration on Environment and Development, 1992.

Indian Policies and Legislation 

  • Water (Prevention and Control of Pollution) Act, 1977.
  • Income Tax Act, 1961.
  • Policy Statement for Abatement of Pollution, (1992). 
  • Government of India, National Environmental Policy, (2006).



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