Making Carbon Markets Work

25 09 2007

Danny Cullenward and David G. Victor in Scientific American

Limiting climate change without damaging the world economy depends on stronger and smarter market signals to regulate carbon dioxide

The odds are high that humans will warm Earth’s climate to worrisome levels during the coming century. Although fossil-fuel combustion has generated most of the buildup of climate-altering carbon dioxide (CO2) in the atmosphere, effective solutions will require more than just designing cleaner energy sources. Equally important will be establishing institutions and strategies—particularly markets, business regulations and government policies—that provide economies with incentives to apply innovative technologies and practices that reduce emissions of CO2 and other greenhouse gases.

The challenge is immense. Traditional fossil-fuel energy is so abundant and inexpensive that climate-friendly substitutes have little hope of acceptance without robust policy support. Meanwhile, for nearly two decades, negotiations on binding treaties that limit global emissions have struggled. But policy makers in Europe and other regions where public concern about climate change is strongest have already implemented significant initiatives to limit release of CO2. Lessons from these endeavors can help governments and world bodies fashion more effective strategies to protect the planet’s climate. Policy makers in the United States, which historically has produced more CO2 emissions than any other nation while doing relatively little to tame the flow, can in particular learn much about creating viable carbon-cutting markets by studying Europe’s recent experience. Based on these insights, we offer several concrete suggestions on how the U.S. should go about constructing an effective national climate policy.

More here.

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