The term “global” has been overused. Unlike in many other contexts, the environment is truly a “global public good.” No single nation can capture for itself a substantial part of the benefits from its own emissions reductions. Thus, it raises unprecedented problems of international coordination and institutional design that require a global solution. In this chapter, we have explored the concept ofexternality in the context ofclimate change. Then, we described various macroeconomic models that have been used to model such externality. The way forward is to implement market-based solutions to the problem of mitigation and adaptation to climate change. These solutions have come from different market experiments, such as cap and trade in the case of sulfur, which can be used to control the emission of CO2. On the other hand, insurance market solutions such as the use ofcatastrophic bonds can be used to help adapt to changing climate. We analyze these issues in the next chapter.