Home Policy Forum 2007 Introduction
The Asia-Pacific region is the most economically dynamic region in the world. In the last decade, growth in industrial production in regional developing countries outstripped global growth rates. The environmental implications of burgeoning regional economies are more significant in Asia than in any other region. Most developing countries in the region are now afflicted by various environmental problems ranging from land degradation to pollution.

These problems have arisen from the process of growth-oriented development that has so often exceeded environmental carrying capacity. Additionally, the phenomenon of market failure has accounted for the aggravation of environmental problems. This failure is largely grounded in the insufficient reflection of environmental resources like water and air as currency values in the decision-making process of an economic entity.

Many developing countries in the region set environmental standards and enforce them in enterprises and households through command-and-control regulation. However, most of their efforts have been limited in their impact because water, air, and other components of the environment are not priced effectively-ranging from under-priced to essentially free. In a market economy in which ecosystem goods and services are not properly valued, building eco-efficient economies and promoting synergies between environmental protection and economic growth requires targeted intervention.

The application of economic instruments is one way of promoting more eco-efficient consumption and production patterns. Economic instruments for environmental protection are policy approaches that "encourage behavior through market signals, rather than through explicit directives regarding pollution control levels or methods." These include property rights, market creation, charges, fiscal instruments, liability systems, and removal of environmentally harmful subsidies. Properly designed and implemented, economic instruments can create incentives to minimize resource use, pollution, and waste, and to foster creative approaches for capitalizing on synergies between economic growth and environmental protection.

According to the UNESCAP publication entitled "State of the Environment in Asia and the Pacific 2005 ", economic instruments have not been widely adopted in Asia-Pacific countries and need to be further promoted to create win-win synergies between economic growth and environmental sustainability. While many Asian market-based economies have delivered impressive economic growth, they have so far demonstrated severe inefficiencies in terms of the environmental standards of resource allocation, which economic instruments could help to correct.