International Environmental Policy and Global Warming: What Role for Market Solutions?

International environmental problems are more difficult to address than their national counterparts, because they. require voluntary agreement among nations. The lessons of environmental policy at the national level nevertheless apply in considering international environmental rules, particularly with respect to problems like global warming. Policies should provide opportunities for nations, firms, and individuals to trade off various types of emissions, on a global scale if possible, and to find cost-minimizing ways to achieve emissions targets. More importantly, existing policies that subsidize resource use in ways with substantial environmental costs, such as fossil fuel subsidies in Eastern Europe and subsidies for deforestation in Amazonia, must be reconsidered. Modifying these policies could improve the efficiency of resource allocation and generate collateral environmental benefits, and might be done through less formal institutions than international treaty.