Price based instruments are those that serve to impose a form of price on goods that lead to environmental externalities based on the form of impact and the measure of impact etc. (Beder, 2001). Prices are not only applied to such cases where it leads to environmental externalities. It is also applied to such cases where the ecosystem services are used quite indiscriminately. Price based instruments have worked in the form of taxation on ecosystem services. In some other cases have been implemented as subsidies for those companies that promote ecofriendly usages.
The form of pricing and taxation measure that is implemented by a government would aim at environmental protection, pollution control and reduction for a much larger area. The price is hence either the penalty that a polluter might pay for creating externalities or is the subsidy given to a company for not polluting or staying within defined pollution levels. In the case of a river environment, there are effluent charges, product based charges etc. that could be applied.
The rights based instruments are called as the quantity based instruments. These are instruments that have a strong emphasis with respect to monitoring (Beder, 2001; Preston and Shackelford, 2002). Compared to price effects in the case of price based instruments, in the case of rights based instruments the focus is on control of quantity to ensure quality (Jordan et al., 2003). Emissions control systems are usually an example of the rights based instruments.
A market friction instrument, on the other hand, is one that does not focus on just conserving or mitigating externalities but instead focused on how to create some form of stimulation for achieving environmental outcomes. Some of the more radical environmental control achievements in the market are based on the market friction instrument. Potts and Howard (2006) present ecolabeling used in marine ecosystems as a form of market friction instrument. Ecolabeling for sustainability as Jacquet and Pauly (2007) and Ward and Phillips (2008) present are both market friction instruments.