Market-Based instruments in internalising externalities must be understood.
I suggest that you be very clear about the exact meanings of externalities and internalising. For example, carbon dioxide has a number of bad effects on the environment if it's concentration is too high. Now, these are externalities - but in economic terms, it's the economic COST of the externalitiy that is measured, not the externality itself. So when you 'internalise' you are transferring a number corresponding to some measure of the economic cost of the externality into an economic system that would otherwise not contain it. So if your instruments do this, then they are 'internalising' but it's the costs they are internalising, not the actual effects. Please don't confuse them - because the cost of an externality can be measured often in more than one way and come up with very different results.
Exactly. Besides environmental taxes, bargaining solution and tradable permits are market-based instruments in internalising externalities.
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