My sunny disposition is wavering as the Copenhagen summit on climate change approaches. I believe that the governments of the world have taken the wrong approach to the problem – and if they had taken a different tack 12 years ago in Kyoto, we would be much closer to dealing credibly with climate change.
The complexities are dizzying, so it may help to be reductive for a moment. The governments of the world are focusing on reducing the quantity of greenhouse gases emitted, through cap-and-trade programmes; they should instead be focusing on increasing the price polluters must pay for emissions. The incentives provided by the two approaches are similar. Both will lead to a higher carbon price and lower emissions, and both could be tweaked over time to produce much the same trajectory of lower emissions. Either system would work well from an economic perspective.
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