[Lownin]

I am not well versed in the theories on this, but as I understand it things like carbon credits are designed deal with the issue of externalities.

Right now, costs of goods do not reflect reality. For example, if a company pollutes a river to save money on producing some widget, people still pay money in the form of lowered property value, future cleanup efforts, medical expenses, etc. Just not neccissarily the people who purchased the artificially cheap widget. If the company can't externalize costs because they still have to pay for polluting, the increased cost is reflected in the price of the widget and market forces will lower the demand, reducing overall pollution caused by widget production. Perhaps even invalidating some problematic business models.

That's my understanding anyway.