■ Global Warming: The Economics of Tradable Permits

National and international taxes may be used as a means of controlling atmospheric trace gases (ATGs), the principal one of which is carbon dioxide. The central assumption made so far, which is clearly violated, is that these reduction cost curves are known with certainty. They are not, and there is considerable argument about that the costs of reducing ATGs are. The alternative solution is to allocate permits to countries on the basis of existing emissions, or on some other criterion. Developing countries, with projected economic growth rates of 5 per cent per annum and more, are simply unwilling to agree to any measures that would involve more than a marginal reduction in that rate of growth. The arguments in favour are the clear economic benefits that could be derived, and the encouragement that the system offers for continued technological developments that limit emissions through increased energy efficiency.