Low-income countries have generally failed to benefit from the rapid economic globalization of the 1980s and 1990s while at the same time faced with declines in official development assistance. Many have serious debt problems and natural disasters and environmental degradation have further crippled some. Consequently, their ability to implement sustainable development strategies has been seriously hindered. Governments, development workers and others are raising questions about how to finance sustainable development. One proposal advanced in 1972 by James Tobin of Yale University suggested a tax on currency exchange transactions.
Carbon taxes are another possibility.
While the proposal was rejected, the EU is looking at applying such a tax at home. Another innovative idea is the Kyoto Protocol's Clean Development Mechanism. Under the mechanism, industrialized countries could get credit for carbon emission reductions by investing in sustainable, energy-saving projects in developing countries. Eliminating perverse subsidies provides yet another option, especially as many current policies encourage economically inefficient development that is ecologically destructive. A number of market-based instruments can correct such perverse economic incentives.