In their contribution to the RPPI report, McCann and Moss consider the likely success of emissions trading schemes to control greenhouse gas emissions. Climate change can produce benign or even beneficial effects, and these must be weighed against the possible negative effects. Efforts to reduce the flow of new greenhouse gas emissions will have an imperceptible effect on the total amount in the atmosphere. Place more emphasis on research, design, and development to address the possibility of a potential catastrophic climate change outcome. Postpone market-based solutions like emissions trading.
Markets require a specific set of conditions to operate smoothly and efficiently.
The lack of adequate market institutions, the transaction costs inherent in these types of trades, and the risks that participants will inevitably perceive will create large barriers to creation of a successful market. In the RPPI report's final chapter, Cordato contends that carbon taxes should not be considered a suitable alternative to emissions trading. Carbon taxes cannot be justified, he contends, either as a matter of economic theory or as a mechanism for creating social benefits. But the aim should not be merely to reduce greenhouse gases, notes Cordato, but ultimately to improve overall social welfare. The uncertainty that envelops the climate change issue makes the ultimate goal impossible to achieve, Cordato contends.