Chapter 1: Introduction
The last 30 years have been the warmest since the first accurate records were created some 100 years ago. The increased temperatures are expected to cause extreme weather events, including heat waves, windstorms, tropical cyclones, floods and droughts. These events will have significant impacts on environmental, social and economic systems. Although the earth's climate has changed many times in history, the climate changes of modern times are unique. The Intergovernmental Panel on Climate Change (IPCC) has, on the basis of numerous scientific studies, concluded that the rising temperatures of the last 50 years are very likely caused by the unprecedented increase in global atmospheric concentrations of greenhouse gases (GHG). This rise in emissions is very likely the result of human activities since the industrial revolution. The most carbon-emission-intensive human activity is fossil fuel combustion, which constitutes 75 per cent of the carbon dioxide emissions from human activities. Carbon dioxide concentrations in the atmosphere are also affected by changes in land use, while increases in methane and nitrous oxide are primary due to agriculture. The logical solution to human-induced climate change is a reduction in GHG emissions. There is widespread consensus that the most efficient means of achieving this reduction is by putting a price on emissions. Emissions pricing is achieved through the introduction of market-based mechanisms, either in the form of emissions trading or emissions taxation systems. The price of emissions is expected to influence the technological decisions of firms and facilitate the transition to a low-carbon economy.