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The countries that have ratified the Kyoto Protocol have pledged to limit global warming by reducing the demand for fossil fuels. But what about supply? If suppliers do not react, demand reductions by a subset of countries are ineffective. They simply depress the world price of carbon and induce the environmental sinners to consume what the Kyoto countries have economized on. Even worse, if suppliers feel threatened by a gradual greening of economic policies in the Kyoto countries that would damage their future prices; they will extract their stocks more rapidly, thus accelerating global warming. The paper discusses the remaining policy options against global warming from an intertemporal supply-side perspective.

Public policies against global warming: a supply side approach