ABSTRACT
When polluters, such as motorists, are actually a majority of the population, political obstacles to serious mitigation measures are enormous. Carbon taxes have been successful wherever tried, but the Nordic examples show that direct government and community involvement is a much more important component of radical mitigation. Carbon emissions will not be reduced by international agreement, government declarations or even commitments, unless there are clear economic incentives for abatement, or, alternatively, credible legal penalties for failure to comply with appropriate regulation. The disruptive effects of large price jumps, and the costs of adjustment to price change in general, are the fundamental reasons why radical mitigation cannot be left to the market to respond to carbon taxation. The challenge policy makers face is to set carbon taxes at an appropriate level initially, and to agree on a credible path of future increases that will be both acceptable and effective in conjunction with complementary policies, without being disruptive and hence counterproductive.
