Carbon markets : inherent limitations and complementary policies

Over the last two decades, carbon pricing - particularly the use of carbon markets - has become a prominent environmental policy option for controlling greenhouse gas emissions. Orthodox economic theory suggests that carbon markets are the least-cost method of achieving emission reductions, and governments in Europe, New Zealand, and now Australia have introduced carbon pricing schemes with faith that this will transform their economies and meet global emission targets. A number of other states and countries are also considering or developing their own national schemes including California, China, Japan, South Korea and Brazil.