An analysis of the feasibility of effectively using market mechanisms to reduce green house gas emissions

Title from first page of PDF file (viewed January 6, 2011)Includes bibliographical references (p. 49-52)The most fundamental question posed by the economics of climate change is how can countries reduce CO2 and other GHG emissions? While the question may instintintively seem quite easy to answer, it is actually an extremely politically divisive question. How governments address going about making these reductions will have lasting impacts on the global economy, the environment and the citizens of the world . The current discourse on climate change legislation is split into two camps. One insists that a system of emissions limits imposed on firms, industries and nations like the Kyoto Protocol is the best mechanism to ensure reductions in greenhouse gas emissions while a second camp calls for emissions reductions be imposed primarily through taxes on GHGs. However, beyond the issue of which market mechanism is most feasible, there are other issues that impede progress in this arena. The first problem is that the largest emitters, the United States and China would most likely have to bear a disproportionate cost of any significant emissions reduction effort. The second problem is that on prominent projections, the United States and China are unlikely to be the most seriously effected from climate change. According to some analyses, the two nations are thus anticipated to bear disproportionately high costs from emissions controls and to gain disproportionately little from such controls. Due to this, as self interested actors, these large emitters have little incentive to participate in any carbon emission reduction scheme. These are major issues that need to be overcome before progress can be made