Climate change is clearly an example of market failure, and policy intervention is evident in order to achieve socially optimal levels. This can be achieved through a variety of methods such as a carbon tax, new standards and regulations, or the increased role of financial markets.
Key learning objectives:
What is market failure?
What are the two important market failures related to greenhouse gas emissions?
How can policy intervention support transition from a high to low carbon economy?
How can financial markets play a role in intervention?