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Market mechanisms provide a better means of tackling climate change at a global level. With the exc...

Market mechanisms provide a better means of tackling climate change at a global level. With the exception of the European Union, regulations are set by individual countries so there is a great risk that each state will come up with its own set of regulations in an attempt to limit carbon emissions. Not only will this be unnecessarily complicated and raise the costs of compliance considerably, there is also a risk that states will have an incentive to introduce only lax regulations in an attempt to attract more business investment than other, more demanding jurisdictions.\ By contrast, market mechanisms can provide a more coordinated and effective international response. A cap and trade system will sit alongside existing international financial and commodities markets. Cap and trade also provides incentives for developing countries to participate by offering them a chance to profit by adopting green technologies and preserving their forests. And although an identical global tax level for carbon emissions seems as unlikely as coordinated regulation, agreement on the principle of carbon taxation would be much easier to achieve. Individual countries could set their own carbon tax rates if they wished, but as they will all be taxing the same damaging emissions the overall impact in the market will be to provide a powerful push to reduce emissions.\