Governments of the world are now launching climate change negotiations for after 2012, when the Kyoto Protocol expires. World leaders acknowledge that civilization is on a dangerous course. Yet there is still little consensus about how to achieve stabilization of greenhouse gases.

We suffer no shortage of ideas about the instruments of action. For example, the world’s governments could impose taxes on carbon emissions that are high enough to choke off the use of fossil fuels in favor of higher-cost but cleaner alternatives. Or they could impose a system of tradable permits that would have the same effect. The problem is not mainly with the instruments but with their unknown costs and benefits. We know we need to act immediately, but because of big uncertainties regarding key technologies, we cannot precisely calibrate the costs and benefits of alternative actions.

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