Market-Based Instruments (MBIs) are tools used to encourage environmentally friendly practices by leveraging market forces. They include mechanisms like carbon pricing, cap-and-trade systems, and environmental taxes, which aim to reduce pollution and promote sustainable resource use. By assigning a cost to environmental harm, MBIs incentivize businesses and individuals to adopt greener technologies and practices. These instruments work by creating economic signals that reflect the true cost of environmental degradation. For example, a carbon tax charges emitters for their greenhouse gas emissions, motivating them to lower their carbon footprint. Overall, MBIs aim to align economic activities with environmental goals, fostering a more sustainable future.