Although most economists argue that a carbon tax would be the most efficient solution, Sir Nicholas is neutral between a carbon tax and the other ways of raising the cost of emitting carbon by regulation or a cap-and-trade system.

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Ferrari president Luca di Montezemolo has repeated his warning in Monaco that his team would pull out of F1 unless there was an amendment to the cap regulation as it stands because of fears of it leading to a two-tier championship.

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It is true that government regulation is punishing inefficiency and rewarding higher performance in specific use of resources through cap and trade measures for carbon and other regulations.

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It is also about to introduce a new regulation on energy efficiency, which will further reduce emissions and which was not factored into the current cap.

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