The second group of charges may be

The second group of charges may be called direct or “active” user charges which include utility
charges (e.g.. for water, electricity, etc.), road tolls, and access fees to parks, beaches, etc. These charges are analogous but not identical to prices for private goods. Road tolls, for example, may be thought of as congestion prices not as prices for gaining access to roads. If there is no congestion, restricting access to roads through road pricing reduces social welfare because there is an unused opportunity to make someone better off without making anyone worse off (known as “Pareto improvement”).
The third group of charges may be called indirect or “passive” user charges and they include
betterment charges and impact fees. Betterment charges are usually imposed on private property
which benefits from public investments. For example, private property values may increase manifold as a result of new roads, parks, environmental clean ups, etc. While property taxes capture some of the windfall appreciation, betterment charges may also be imposed to collect revenues for financing the relevant public investment or for partial cost recovery. This is an application of the beneficiary pays principle and could be a major source of financing, but its incentive effect is rather limited and indirect: betterment charges, if sufficiently high, may reduce the incentive for private land owners to lobby government officials to influence the location, type, and level of public infrastructure and services in order to benefit their property. Impact fees are charges that aim to internalize the external cost of private investments (construction, tourism, or industrial development) on the landscape or the
ambient environment. For example, a charge may be imposed per cubic meter of built up place. The
incentive effect here is stronger than with betterment charges, especially as it applies to new
construction. As such impact fees may be classified as “visual pollution charges” and included in the first group, impact fees generally refer to a much larger set of environmental impact, and may, in a sense, be thought of as the reverse of betterment charges.
Financial Instruments
Financial instruments have many similarities with subsidy and tax incentive systems and share many of their limitations as well. Financial instruments are distinguished from fiscal instruments because they are often extra-budgetary and financed from foreign aid, external borrowing, debt for nature swaps, and the like. Since funds are fungible and loans must be serviced and repaid somehow, the implications of financial subsidies are not very different from those more closely connected with the government budget. Often the motivation behind the creation of special funds for environmental protection or resource conservation is to avoid the scrutiny of the budgetary process. Yet, the propensity of many finance ministries to underspend on resource conservation and environmental protection and to overspend on distortionary subsidies to environmentally destructive activities provides ample justification for earmarked environmental funds. When such funds are financed through environmental charges or external borrowing, they often become a source of friction with finance ministries that tend to regard them as soft funds, crowding out other higher-return private and public investments.
Financial instruments such as revolving funds, green funds, relocation incentives and
subsidized interest or soft loans (for projects with significant positive externalities, e.g.,
reforestation) may be justified as (a) second-best responses to distorted or inefficient capital markets, (b) vehicles for internalizing positive externalities or environmentally minded investors' willingness to pay for socially responsible investments, and (c) instruments for mobilizing additional financial resources for conservation, environmental protection, and sustainable development.
While the instrumental value of financial incentives in a second best world cannot be denied, the firstbest policy is the correction of capital market imperfections, efficient budgetary allocations, and fullcost pricing. Financial subsidies, soft loans, subsidized interest rates, and foreign exchange or special funds are too blunt as instruments for the efficient internalization of external social costs.