An Investigation of Appropriate Economic Instruments for Preventing the Negative Impacts of Construction Projects on the Environmental Utility

Abstract Most large construction projects are accompanied with a plethora of impacts which either increase or reduce different utilities. A fall in the environ-mental utility, which is usually among the consequences of construction projects in the long run, arises from three different sources: mismanagement of projects, the nature of the development and lack of efficient methods for accurately mea-suring and estimating environmental externalities of projects. To compensate for such losses and to balance the total utility of the society, economic instruments can be used for the environmental management of projects. Developing coun-tries ’ governments are searching for sustainable development instruments. Such instruments, which are usually economic in nature, bring about a combination of economic and environmental policies. Economic instruments can be divided into the two distinct categories entitled Property Rights Approach (Coase Theory) and Government Policies, each having diversified approaches and instruments in their subcategories. The present study investigates the advantages and limitations of the above-mentioned instruments, thus allowing their appropriate applications. Based on such findings, the projects ’ clients – usually the governments – would be able to select suitable economic instruments for preventing, mitigating and compensating for the fall in the environmental utility according to the type and nature of a given project