Abstract
Among the key climate-policy challenges we face is the need to price carbon appropriately without which our required transition to a low-carbon economy will not come about for lack of proper price signals and incentives. But how do we price an invisible pollutant like CO2? That price is inversely related to the world community’s carbon budget imposed by the Paris Agreement’s objective of limiting the average temperature hike. One method would be to relate the carbon price to the so-called social cost of carbon as a pollutant damaging the environment. Another method to price carbon would be in relation to the marginal cost of abatement linked to climate-mitigating investment projects. Treating greenhouse gas emissions as just another negative externality, we have so far used traditional approaches of proposing either a market-oriented solution as in various cap-and-trade schemes or an emissions tax. But neither such carbon markets nor carbon taxes have proven adequate up to now, pointing to the need for stronger solutions in the near future.
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Guttmann, R. (2018). Pricing Carbon. In: Eco-Capitalism. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-92357-4_5
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DOI: https://doi.org/10.1007/978-3-319-92357-4_5
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