Developments over the past few years have shown that reforms to address climate change are no less difficult to implement than reforms in other areas, even if the objective of limiting global warming is broadly accepted. In the case of global public goods such as the climate, the political challenge is further complicated by the need to convince voters that domestic action to reduce greenhouse gas emissions is worth taking, notwithstanding the cost and uncertainties regarding other countries’ commitments.

This paper proposes an analytical framework for assessing policies that will contribute to a better integration of environmental externalities in the pursuit of economic efficiency and growth objectives. The framework consists of two parts.