Tackling Global Warming: Market Instruments or Regulatory Solutions
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             Global warming is now officially recognised. Never mind the science, the world will behave as if it is fact-unless forced to recognise more pressing short-term problems, such as global recession. This is probably no bad thing and at least is in line with the principle of precaution. Having signed up to the scenarios at Kyoto, the political process must now prescribe the prophylactic procedures pertinent to performance.
             It is here that the debate separates out into the visionaries and pragmatists. The first certainly want to reduce the carbon-dioxide-concentrations (CO2), but in a way that is politically correct. This can range from sustainability to cost-effectiveness-depending on which side of the spectrum you are standing. To attain their objectives will require new measures-ethical, economic or ecological-which are nearly all untried or unproven. The pragmatists, who have seen it all before, believe that only command-and-control can cut it.
             So what are the objectives that these mechanisms have to achieve? Again, there are two main alternatives:
             · social engineering (visionaries);
             · real reductions (pragmatists).
             I would suggest that the most cost-effective and eco-efficient (ie, minimum impact) way is a 'given', for all but the most fanatical proponents of the pain/gain persuasion. The first approach aims to change behaviour, subtly or otherwise, by making it more difficult to do the wrong thing. Economic instruments (taxes, fines?) would increase the cost of the 'bad' until the users turn to 'good' in desperation. (Unleaded petrol is fast becoming the definitive, lonely example).
             These instruments, as will be argued much more eloquently by my economist colleagues, use market forces to optimise the costs and maximise the effects. A landfill tax has...