Tackling climate change is one of the biggest challenges of our age, but it could also be one of our greatest opportunities.

Reducing emissions on the necessary scale requires global action by all countries in all sectors of the economy. We’ll need nothing short of a revolution in the way energy is produced and consumed. The benefits of this transformation will go beyond the contribution it makes to combating climate change; it will improve the quality of life for everyone across all developing and developed countries.

Achieving these objectives requires coordinated actions by all countries and a strong involvement of the private sector at a global level. Market-based approaches should be the cornerstone as they can encourage entrepreneurship and deliver emission reductions in the most cost-effective way. The direct participation of businesses will foster the right investment choices at the right time.

Carbon markets are already a solid reality with the growing involvement of developed and developing countries. The EU Emission Trading Scheme (ETS) and Kyoto mechanisms have proven effective at mobilizing private capital to implement domestic abatements and emission-reduction projects in emerging countries, delivering tangible and remarkable results. Yet we are aware that this is not enough: reductions achieved so far are still well below the levels, recommended by scientists, which are necessary if we are to have a good chance of avoiding dangerous climate change. We need to set clear, long-term targets within a stable regulatory framework.

We must also scale up the level of ambition of our climate policies; strengthen the commitment of the private sector; and promote a wider involvement of all countries, including Least Developed Countries and Small Island Developing States, through market-based mechanisms.

The ongoing debate on a Global Agreement, and the definition of new market mechanisms, are important steps in the right direction. But we need to develop clear and predictable rules as soon as possible if the necessary investment is to be planned and implemented effectively.

It is essential to involve the private sector from the very beginning of this process, and to encourage public-private partnerships. This will be the best way to define the right incentives and develop the new market mechanisms necessary for the promotion of sustainable green growth.

Authors: Sir Nicholas Stern is Chair of the Grantham Research Institute on Climate Change and the Environment at the London School of Economics and a widely published author on climate change mitigation.  Simone Mori is the Director of Regulatory and Environmental Management at Italian Energy company Enel.

Pictured: Enel SpA’s new hydrogen-fuelled combined cycle power plant is pictured inside the Andrea Palladio Fusina plant in Venice. REUTERS/Alessandro Garofalo