This paper examines the use of economic instruments in the protection of the global environment (particularly, global warming caused by enhanced carbon dioxide emissions), examining the potential impact on trade and welfare, from a developing country (LDC) perspective. Such economic instruments are currently being used to tackle various environmental problems including air pollution and acid rain at the local level. Their use has also been proposed in multilateral environmental agreements such as the Montreal Protocol, the UN Convention on Long Range Transboundary Pollution and the Framework Convention on Climate Change (FCCC). In the case of some of these inter-national agreements, their use is still being explored, given the need for global consensus on a multiplicity of issues. Of particular importance is the need to identify policy options in developing countries, in light of expected increases in LDC emissions of greenhouse gases (GHGs) arising from increased energy use.