Incentive Based Regulations

Incentive-based regulations, also known as "pay for performance" regulations, are regulations designed to encourage specific behavior by providing a tangible, quantifiable reward for compliance. For example, a company may be rewarded with lower taxes or other regulatory compliance fees from a government agency if it employs environmental practices such as using renewable energy sources, reducing emissions, and conserving resources. Incentive-based regulations can be applied to a variety of industries, from energy to transportation to consumer products. Incentive-based regulations are designed to counterbalance traditional "command-and-control" regulatory approaches, which are often inefficient, costly, and time-consuming. By providing an incentive for businesses to take steps toward protecting the environment, public health, and consumer safety, incentive-based regulations can be an effective way to encourage compliance.