In the past decade, market based instruments (MBIs) have become more frequently applied for natural resource and environmental management purposes. MBIs comprise a range of instruments used to provide economic incentives/disincentives (e.g. by altering market prices, setting a cap or altering quantities of a particular good, improving the way a market works, or creating a market where no market currently exists) to economic agents to change their behaviour in an environmentally desirable manner. It is important to note that MBIs often rely on a regulatory framework and carefully designed policy instruments to operate effectively. MBIs must be tailored to local needs and conditions. Institutional capacity building and community participation are regarded as key components in this process. This paper outlines the challenges and opportunities for developing and implementing effective market-based mechanisms in South Australia. Particular interest are put on the institutional capacity building for MBIs adoption and implementation, and a decision framework for selecting appropriate instruments is also proposed.


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