Abstract

Economic growth and environmental protection can be experienced at the same time but they do not come automatically and without costs. The government has to play its own important role in the interest of society as a whole, that is, it has to set credible environmental targets first and then choose the appropriate instruments of intervention. In doing this, cost efficiency and long run incentives are the criteria to be followed. International/global agreements are necessary both to secure the targets, which are global and to share the costs. The most reliable instrument appears to be a system of tradable permits; it is cost efficient and apparently accepted by markets on both sides of the Atlantic.