Carbon Pricing

Carbon pricing is a policy tool used to address climate change by putting a price on carbon emissions. The basic idea is to make emitters of greenhouse gases pay for the carbon they release into the atmosphere, providing an economic incentive to reduce emissions.

Click Here

Two Main Approaches of Carbon Pricing

Carbon Tax

How it works: Governments set a price per ton of carbon emitted, and emitters (such as businesses or industries) are required to pay this tax based on their emissions.

Goal: Encourages emitters to reduce their carbon emissions to avoid paying higher taxes.

Emission Trading System

How it works: Governments set a cap on total allowable emissions and issue a corresponding number of permits or allowances. Emitters can buy and sell these permits in a market. If a company reduces its emissions, it may have excess permits to sell; if it exceeds its cap, it must buy additional permits.

Goal: Provides a market-based mechanism for allocating emissions reductions to the most cost-effective sources.

Paris Agreement

The Paris Agreement encourages countries to use market mechanisms, including carbon pricing, to achieve their emission reduction targets.

View All