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Identifying the problem and causes of global warming is a scientific task, while identifying the solution is largely an economic one.

The main cause of global warming is the increase in atmospheric carbon dioxide levels that results from human activities such as burning fossil fuels, cement manufacture and deforestation. The solution is then to discourage these activities and encourage alternative activities that produce less greenhouse gases. Penalties and rewards are the economist's way of changing our behaviour in such a way as to minimise harmful externalities. Taxes on high carbon dioxide emissions result in businesses looking for ways to avoid those taxes, and finding low-emission solutions. Tradable emission permits are a more sophisticated economic technique, because they actually reward businesses that can reduce their emissions, as well as allowing governments to set 'caps' or limits on total carbon emissions each year.

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Q: What are the benefits of emission taxes and tradable emission permits?
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