I found this site the other day regarding CO2 emissions and the upcoming implementation of the Kyoto Protocol regarding the reduction of CO2 emissions around the world (with the exception of the unilateralist United States).
The idea of trading emissions credits strikes me as one of the best market-based ideas to reduce pollution. This presents a wonderful carrot and stick approach, by capping emissions by all groups, but by creating a method to reward those who volutnarily reduce their emissions below the mandated caps by enabling them to trade their quotas to other producers.
In fact, I would argue that once such a system has been implemented, it would be worthwhile for governments to, over time, step in to those markets to buy off existing credits on a permanent basis, thus forcing the worldwide caps even lower. Since those credits would no longer be in the market, the overall emissions caps would be lowered using the laws of supply and demand, not through regulation. Now what Republican couldn’t agree with harnessing the powers of capitalism in order to reduce environmental pollution?