Martin Wolf of the Financial Times offers three criteria for post-Copenhagen climate change policies to be truly effective.
First, we need prices for carbon that apply over relevant planning horizons. That price cannot be fixed forever, but must change with events. But it needs to be far more stable than in the European Union’s market for permits (see chart). A tax seems more attractive to me than “cap and trade”, for this reason.
Second, where the abatement occurs must be separated from who pays for it. Abatement needs to happen where it is most efficient. That is why emissions of developing countries must be included. But the cost should fall on the wealthy. This is as much because they can afford it as because they produced the bulk of past emissions.
Finally, we need to develop and apply innovations in all relevant technologies. A paper from the Bruegel think-tank argues, persuasively, that merely raising prices on carbon emissions would reinforce the position of established technologies. We need large-scale subsidies for innovation as well.