"The cost is applied to greenhouse gas emissions in order to encourage polluters to reduce the combustion of coal, oil and gas – the main driver of climate change."
The imposition of a fee on carbon emissions in order to encourage companies and individuals to reduce their reliance on fossil fuels.
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Carbon Tax: A levy on fossil fuels based on their carbon content. The tax rate increases with the amount of carbon dioxide (CO2) emissions released into the atmosphere.
Emissions Trading Systems (ETS): A cap-and-trade system that sets a cap on the total amount of CO2 emissions allowed for a particular industry or region. Companies can buy and sell emissions allowances, enabling them to control their own emissions.
Hybrid Systems: Combines elements of a carbon tax and an ETS.
Fee-and-Dividend: A carbon tax that returns the revenue generated through a dividend to households or to investments in clean energy.
Border Adjustment Mechanisms (BAM): A mechanism that adjusts the price of imports and exports based on the carbon content emitted during their production. BAM aims to protect local businesses and reduce emissions leakage.
Carbon Offsetting: A system where organizations and individuals can pay for an offset to negate the carbon emissions they produce. Carbon offsetting is a contentious carbon pricing method as its efficacy is debated extensively among climate scientists.
"The method is widely agreed and considered to be efficient."
"Carbon pricing seeks to address the economic problem that emissions of CO2 and other greenhouse gases (GHG) are a negative externality – a detrimental product that is not charged for by any market."
"A carbon price usually takes the form of a carbon tax or a Cap and Trade system (generally via an emissions trading scheme (ETS)), a requirement to purchase allowances to emit."
"21.7% of global GHG emissions are covered by carbon pricing in 2021."
"Regions with carbon pricing include most European countries and Canada."
"On the other hand, top emitters like India, Russia, the Gulf states, and many US states have not yet introduced carbon pricing."
"Australia had a carbon pricing scheme from 2012 to 2014."
"In 2020, carbon pricing generated $53bn in revenue."
"According to the Intergovernmental Panel on Climate Change, a price level of $135–5500 in 2030 and $245–13,000 per ton CO2 in 2050 would be needed to drive carbon emissions to stay below the 1.5°C limit."
"Latest models of the social cost of carbon calculate a damage of more than $3000/tCO2 as a result of economy feedbacks and falling global GDP growth rates."
"While policy recommendations range from about $50 to $200."
"One exception is the European Union Emissions Trading System (EU-ETS) which exceeded 100€/tCO2 ($118) in February 2023."
"A carbon tax is generally favored on economic grounds for its simplicity and stability."
"Cap-and-trade theoretically offers the possibility to limit allowances to the remaining carbon budget."
"Current implementations are only designed to meet certain reduction targets."
"The main driver of climate change is the combustion of coal, oil, and gas."
"The cost is applied to greenhouse gas emissions."
"Emissions of CO2 and other greenhouse gases are a negative externality – a detrimental product that is not charged for by any market."
"The cost of carbon pricing is applied to encourage polluters to reduce the combustion of coal, oil, and gas."