Limiting climate change without damaging the world economy depends on stronger and smarter market signals to regulate carbon dioxide
* Supplement: Extended version
We must cut rising world emissions of carbon dioxide to avoid severe climate change.
Taxes on carbon emissions are effective, but politics discourages their adoption in the U.S. More likely is a federal cap-and-trade market in which polluters get emissions permits and choose how to meet their reduction targets.
Cap-and-trade markets must be closely managed to be successful, and they cannot do the job without complementary policies that affect emissions. A detailed analysis of the existing European Union carbon market provides valuable insights.
--The Editors
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 atmospheric carbon dioxide (CO2), effective solutions will require more than developing cleaner energy sources and hoping for their wide adoption. Equally important will be establishing institutions and strategies—particularly markets, business regulations and government policies—that will provide incentives for companies to apply innovative technologies and practices that reduce emissions of CO2 and other climate-altering 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. Unfortunately, for nearly two decades negotiations on binding treaties that limit global emissions have produced only meager progress. But that has not stopped policymakers in Europe and other regions where public concern about climate change is strongest from implementing initiatives that offer lessons on how best to curb the planet’s high-carbon diet.
David G. Victor and Danny Cullenward work at Stanford Universitys Program on Energy and Sustainable Development (PESD), which is sponsored by BP and the Electric Power Research Institute. Victor, a fellow at the Council on Foreign Relations and a professor of law, is the director of PESD, where Cullenward is a research associate. They have collaborated on numerous topics, including an estimation of the greenhouse gas emissions from hydroelectric dams in tropical regions of the globe.
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