This week the EU has voiced its plan to help the environment through a variety of new policies that would be implemented throughout all the member countries. The plan involves a 10% minimum target on the use of bio-fuels in transport by 2020, a commitment to increase use of solar, wind and hydroelectric power, and a possible ban on filament bulbs in offices, street lights and private homes by the end of the decade.

In order to decide whether governments are doing enough, it first has to be determined what the potential economic effects of global warming are. After all, if the economic effects of global warming are minimal, then there will be little urgency to act. At the moment the general opinion of most well respected scientists in the field is that the effects are going to be significant. With temperatures predicted to increase by as much as 10°C by the end of the century, the world’s population distribution could be seriously affected, leading to lower industrial output. In addition, there will be a movement of the population to inland areas, leading to increase congestion. Major industrial and commercial cities such as London will experience high air pollution in the summer season and heat wave stress. On the other hand, there is evidence to suggest that tourism will benefit from a longer tourism season. UK seaside resorts will attract more tourists as the continent becomes too hot. Furthermore, the effects of national disasters on the UK's infrastructure must be taken into account. Many have attributed the recent UK flooding to climate change, and the costs to both government and the insurance industry are clearly significant.

The UK government recently published a Climate Change Bill aiming to achieve a mandatory 60% reduction in carbon emissions by 2050, with a target of 26-32% by 2020. This suggests that the UK will exceed its 5.2% target by 2012 implemented by the Kyoto protocol, demonstrating a good level of initiative by the UK government. In addition, the government has introduced several new laws recently to combat pollution caused by fuel-inefficient vehicles. All vehicles are now put into six tax bands depending on their CO2 emissions, ranging from £65 to £165, with 4x4 vehicles, seen as a demerit good, being taxed at the higher end of the range. However, some may claim that the purpose of this is to raise money rather than discourage the use of these vehicles. The effectiveness of these measures is questionable, as the average 4x4 owner is in a high income band, and so the additional £100 annually to run their vehicle is a small percentage of their income, and therefore is likely to be price inelastic, that is, to have little effect on demand. As a result of this, it may be argued that this measure is simply a gimmick to appease green campaigners, while also presenting the government with an opportunity to increase revenue. The government has also put forward suggestions of making motorists pay by the mile, ranging in price dependent on location, which could have the positive effect of also reducing congestion, but the potential negative effect of reducing aggregate supply. However, if the government is to encourage the use of public transport, it will be necessary to increase investment, possibly through subsidies.

Despite the targets and taxation implemented by the UK government, there remains areas in which it can improve. Currently, the UK produces 5% of its electricity from renewable sources, with a target to increase this to 15% by 2015. This is by no means an easy target to obtain, and is a respectable fraction of energy supply, but the fact remains that it still leaves 85% of the UK energy supplied from non-renewable sources. It is important therefore that the government establishes plans for the growth of nuclear energy production as a replacement for the current dominant supply of energy, as renewable sources will only be capable of providing a small fraction of our needs in the future. It is also worth considering that the government is being hindered from taking effective action by political pressure from the UK public and environment groups who simultaneously demand reducing the UK contribution to global warming and cry out in protest when energy sources such as nuclear and the Severn Barrage are suggested. France currently produces around 90% of its energy from nuclear fission, showing that nuclear energy can be effectively implemented and scaled. Also, the £14 billion Severn Barrage could, if built, satisfy 5% of the UK's energy demands, the equivalent of 12 nuclear power stations. In making these decisions, it should be considered whether the external costs, such as wildlife depletion are too great for such projects to be considered acceptable as to damage one section of the environment in saving another would be considered counter-productive.

Another area in which improvements can be made is in the aviation industry. Currently, 5.5% of emissions are produced from aircraft. The government currently applies duties to air travel, but can only begin to heavily tax flights when other countries are willing to cooperate, otherwise expensive air travel to the UK may have a negative economic effect. Business travellers may be discouraged by the high costs of travel, and therefore companies will be less confident about investing in the UK, thereby reducing the UK's long-term ability to increase its productive capacity.

Ultimately, the UK government has to bear in mind that its efforts to reduce emissions will have little global impact in a rapidly developing world economy, as seen most obviously in China and India, as the UK only accounts for around 2% of global man-made emissions. Despite this, there may be indirect effects, political in nature, if the government leads the way in cutting emissions, with other nations potentially following this example. As the UK is one of the three major players in Europe, it at least has the potential to spread political will throughout the continent. In reality, the most significant nations to persuade to cut greenhouse emissions are America, China and India.