ECONOMISTS view pricing greenhouse-gas emissions as an elegant way to reduce them. There are more than 70 national and regional schemes, covering perhaps a fifth of global emissions, which charge polluters for the carbon dioxide they belch out. But that leaves an awful lot of the world to be convinced of the merits of such schemes. Sceptics point to the lacklustre decarbonisation record of places that already price carbon. Higher charges would help; but then the politics also has to add up.
Governments have two ways to price carbon. They can levy a tax on each tonne of CO2 emitted, an approach pioneered by Finland in 1990. Or they can issue a fixed number of pollution permits to companies, which can then trade the permits with others. The European Union (EU), a handful of American states and, starting this year, China have opted for some version of this “cap-and-trade” approach. These schemes have tended to be limited to a few carbon-intensive industries, such as power generation,…
