In the field of environmentalism -- where brows tend to be frozen in furrow and despair is a professional credential -- Gregg Easterbrook of the Brookings Institution is notable for his optimism. And one cause of his sunniness is smog in Los Angeles.

In 1975, Los Angeles exceeded the ozone standard 192 days out of the year -- meaning the choking smog was so bad that children, the elderly and the infirm were better off avoiding the risky practice of outdoor breathing. In 2005, the ozone standard was exceeded on just 27 days. Los Angeles has had 30 years of consistent improvement in reducing smog.

As conservatives would expect, these gains were largely the result of technology -- the catalytic converter in automobiles and reformulated gasoline -- and not by pedaling to work or undoing the Industrial Revolution. Smog was reduced mainly by innovation, not austerity.

But liberals are correct about something else: This technological progress would not have taken place as a result of the free market alone. Easterbrook argues that as long as producing pollution is a free good -- without cost to the polluter -- there is little economic incentive to produce new methods to restrict it. Federal and state regulations on auto emissions and air quality created an environment in which the invention of new technologies was economically necessary.

There are lessons here in the controversy over global warming. The debate is less and less about the existence of the problem itself. A consensus has hardened and broadened that global temperatures are increasing, that humans have contributed to the rise and that this is eventually a bad thing for the planet -- views held by the environmental movement and publicly affirmed by the current president. The differences come on whether these environmental changes are likely to be gradual and manageable or swift and apocalyptic. Here, the scientific computer simulations are complex and speculative, and their conclusions are sometimes wildly overplayed.

Hysteria on the environment is a liberal temptation. Prudence, however, remains a conservative virtue, and it requires the issue of warming to be addressed.

But is it addressable? Would any politically feasible policy changes by Congress and the president make a dent in this trend? There is good reason for skepticism. American emissions of greenhouse gases such as carbon dioxide are only part of a global problem. China and India are quickly building new coal-fired power plants to sustain massive economic growth. According to one estimate, China surpassed the United States in the production of greenhouse gases last year. We are only at the beginning of globalization -- and right now, that process is inseparable from the burning of fossil fuels. American restrictions on greenhouse gases, in isolation, would not be decisive.

This is not, however, an excuse for inaction. There is another, more compelling reason to consider a cap on the production of carbon dioxide. As in the case of fighting Los Angeles smog, this type of government regulation would create economic incentives for the development of new technologies -- incentives that do not exist in the free market. Capturing and storing carbon dioxide from power plants, by all accounts, is a difficult technical challenge. But the problem is much more likely to be solved if someone has a direct economic interest in solving it.

There are several proposals by members of Congress -- including a bipartisan bill from Sens. Joseph Lieberman and John Warner due next month -- that take a "cap-and-trade" approach to greenhouse gases. The government mandates overall reductions in emissions and lets companies decide how to implement them. If someone produces less carbon dioxide, for example, that reduction can be sold to another producer and yield some money in the process. This kind of market-based system has been used successfully to cut coal-powered plants' emissions of sulfur dioxide, the main cause of acid rain.

A cap-and-trade system isn't perfect. It is open to fraud -- companies in other countries have sometimes increased their production of pollutants to get benefits for cutting them later. A cap-and-trade bill could be used by Congress to push subsidies toward pet environmental projects of questionable value.

But the overall argument for a cap-and-trade system is strong. The answer to global warming will eventually be technological -- the production of energy without the production of heat-trapping gases. But only the government can create the incentives for Americans to work on this problem with urgency and seriousness. And there is hope to be found in the clearer skies of Los Angeles.