Global Warming Solutions: Markets, taxes, or nothing at all?

Assume man-made global warming is a big, bad problem. Let's try some thought experiments concerning what, if anything, should be done about it. One "solution" might be recognizing, at least, that there is nothing to be done about it. One might argue that for the sake of lifting billions of poor people out of abject poverty humanity must continue to burn cheap oil and coal to fuel economic growth in this century. One unavoidable side effect is that this will increase the amount of heat-trapping carbon dioxide in the atmosphere and thus boost global average temperatures by between 1.5 and 4.5 degrees Celsius by the end of the century. People three generations hence will just have to adapt to this increase. Fortunately because of the wealth produced by burning fossil fuels, average incomes will have increased about sevenfold and so they will have the resources to do so. In addition, wealth may enable them to develop new low pollution energy technologies. But let's further assume that that it turns out that most people prudentially prefer to leave a cooler planet to their posterity. What to do then? In that case, one proposed "solution" is a global carbon market. This is the idea behind the European Union's Emissions Trading Scheme (ETS) established to meet its commitment to reduce greenhouse gas emissions under the Kyoto Protocol. Countries set a limit on how much carbon dioxide they will emit and then allocate permits to emitters. The permits can be bought and sold among emitters. Those that can cheaply abate their emissions will do so and have some permits leftover. The cheap abaters can then sell their extra permits to other emitters who have a harder time reducing their emissions. Thus a market in pollution permits finds the cheapest way to cut emissions. The advantage of creating a carbon market is that it allows for the setting an overall specific limit on carbon emissions. For example, some scientists argue that it will be necessary to cut humanity's carbon emissions by 70 percent in order to stabilize the concentration of carbon dioxide in the atmosphere. Once carbon has a price, it boosts the prices that people pay for electricity and gasoline. Read the rest of the article here.