Stiglitz vs Bush
On matters of economic policy, I am more likely to side with Bush than Stiglitz, but not this time.
A global externality can best be dealt with by a globally agreed tax rate. This does not mean an increase in overall taxation, but simply a substitution in each country of a pollution (carbon) tax for some current taxes. It makes much more sense to tax things that are bad, like pollution, than things that are good, like savings and work.
Although President George W. Bush says he believes in markets, in this case he has called for voluntary action. But it makes far more sense to use the force of markets – the power of incentives – than to rely on goodwill.