Typology of Economic Instruments According to Experts
Instruments for increasing revenue, such as taxes and licensing fees, can increase the relative costs of technology intensive and emissions products. This instrument creates ongoing incentives for innovation to improve emissions efficiency or to substitute for lower emission substitutes, as well as provide government revenues.
Typology of Economic Instruments, According to Umar Lawal Aliyufad Journals (2018-2019), economic instruments can be divided into three general categories according to their impact on government finances, namely:
Budget-neutral instruments, which increase the relative costs of emissions and or energy-intensive technologies and products, but do not increase revenue for the government.
This category includes market-based regulations, which require companies to meet quality standards but allow them to sell them to other parties to meet the commitments of this standard. This budget-neutral instrument can be specialized in technology (for example renewable portfolio standards or motor vehicle emissions), or it can also be specialized in performance (for example domestic emission trading programs).
Exporting instruments, such as subsidies and other incentives that reduce the relative costs of technologies and products with lower emissions and / or energy intensity, make them more competitive with existing technology.
This instrument can be aimed at existing decisions (for example through accelerated depreciation for tax purposes) or long-term competitive costs through financing or researching, developing and commercializing new technologies. By financing these subsidies, the government should increase other taxes or reduce exporters.
Whereas Panayatou (1994) referred to in Fauzi (2007) further divided the typology of economic instruments in more detail which is based on: property rights, market creation, fiscal instruments, charge systems, economic instruments , Financial instruments, Liability instruments, Performance and bond systems.
Other perspectives from economic instruments, can be distinguished based on the scope of its application, whether applied broadly, by only giving signals to the economy and letting the market determine its own response. Or it can also be targeted at specific sectors, technologies or activities. In connection with this economic instrument, several general principles were applied in the design of the model, namely: The cost of fiscal policy is usually lower when it is correctly designed, and continuously.
Instruments should be widely functioning and flexible, because they are usually cheaper than targeted instruments or instruments for specific things to achieve the same reduction.
Instruments should encourage companies and households to invest in equipment and production processes that are more efficient (when needed to replace existing equipment and when additional equipment is needed) will be cheaper than instruments that require them to adjust to changes in capital.
The instrument is expected not to make welfare transfers between the parties involved and or the region. Such instruments are easily accepted by the public (for example, in the condition of recycling target revenue, or transition measurements, carbon charges will transfer welfare from areas of intensive use of fossil fuels to areas that utilize hydroelectric resources a lot.
The type and magnitude of the economic impact of each economic instrument varies, although the environmental output may be the same. Meanwhile, various ways can be done to mitigate the impact and improve the effectiveness of the detailed design of various economic instruments. In developing this economic instrument model there is usually a trade off between minimizing aggregate costs and other objectives such as minimizing the distribution of impacts.
In developing this instrument, it is important to pay attention to the interaction of existing policies and the impacts that occur from these interactions with the expected outputs. Another consideration is in designing the policy package is staging, both to reduce costs by adapting to the natural pace of long-term capital stock turnover and making fiscal instruments to build the stages of technology.
The concept of development is often associated with the process of industrialization, because often the notion is considered “the same”. The first developed country was England. The industrial revolution, often an innovation that saved the cost of a steam engine, enabled Britain to increase its industrialization by 400% during the first half of the 19th century. Since then until now the main criterion of development has been an increase in per capita income which was largely due to industrialization.
Industrial development is a function of the main objectives of people’s welfare, to improve the quality of human resources and their ability to make optimal use of natural resources and other resources.
This also means as an effort to increase the productivity of human labor accompanied by efforts to expand the scope of human activity.
We have often heard opinions that the industry has a role as the leading sector. Leading this sector means that with industrial development it will spur and promote the development of other sectors such as the agricultural sector and the service sector. Rapid industrial growth will stimulate the growth of the agricultural sector to provide raw materials for industry. The service sector also develops with the existence of such industrialization, for example standing financial institutions, marketing institutions, and so on, all of which will later support the rapid growth of industry (Lincolin Arsyd, 1999: 354).
Typology of Economic Instruments According to Experts