Carbon Pricing Policy
Fighting global warming will necessarily require taxing carbon emissions or setting a price on carbon pollution. At least 46 countries and 26 sub-national governments have established a carbon pricing policy as of April 1.
How? : There are several paths governments can take to price carbon, all leading to the same result. They begin to capture what are known as the external costs of carbon emissions – costs that the public pays for in other ways, such as damage to crops and health care costs from heat waves and droughts or to property from flooding and sea level rise – and tie them to their sources through a price on carbon.
Why? : Climate change is one of the greatest global challenges of our time. It threatens to roll back decades of development progress and puts lives, livelihoods, and economic growth at risk. A price on carbon helps shift the burden for the damage back to those who are responsible for it, and who can reduce it. Instead of dictating who should reduce emissions where and how, a carbon price gives an economic signal and polluters decide for themselves whether to discontinue their polluting activity, reduce emissions, or continue polluting and pay for it. In this way, the overall environmental goal is achieved in the most flexible and least-cost way to society.The carbon price also stimulates clean technology and market innovation, fuelling new, low-carbon drivers of economic growth.
Types: There are two main types of carbon pricing: emissions trading systems (ETS) and carbon taxes.
There are also more indirect ways of more accurately pricing carbon, such as through fuel taxes, the removal of fossil fuel subsidies, and regulations that may incorporate a social cost of carbon.