Carbon pricing

Timeline

• 2005In practice, it has resulted in a fairly strong carbon price from 2005 to 2009, but that was later undermined by an oversupply and the Great Recession.
• 2012Australia had a carbon pricing scheme from 2012 to 2014.
• 2018Recent policy changes have led to a steep increase of the carbon price since 2018, exceeding 100€ ($118) per ton of CO2 in February 2023.
• 2024As of 2024, a total of 1,753 companies across 56 countries reported using ICP through the Carbon Disclosure Project (CDP).

Read

• Climate policy after CopenhagenKarsten Neuhoff · 2011Book
• Carbon PricingIan Parry · 2021Book
• Global Carbon PricingPeter Cramton · 2017Book
• Carbon Pricing in JapanToshi H. Arimura · 2020Book

Listen

• Climate Economics with Fexingo: Carbon Pricing, Green Policy, and Sustainability CostsFexingoPodcast
• Carbon Pricing-Thing 1 and Thing 2lalaPodcast
• Pricing NatureYale Center for Business and the Environment, Yale Carbon Charge, and Yale Tobin Center for Economic PolicyPodcast

By the numbers

• 4.7CO₂ per person (t) — global, 2024 (World Bank)
• 31.1Forest area (% land) — global, 2023 (World Bank)

Debates

• Should carbon pricing be the primary tool for reducing greenhouse gas emissions?One view: Yes, it creates a market incentive for businesses and consumers to reduce emissions efficiently across the economy. · Another: No, it can disproportionately burden low-income households and requires complementary policies to be truly effective.Open question
• Is a carbon tax or a cap-and-trade system more effective for carbon pricing?One view: A carbon tax offers price certainty, which helps businesses plan investments in cleaner technologies. · Another: A cap-and-trade system guarantees a specific emissions reduction limit, ensuring environmental targets are met.Open question

Glossary

• Carbon taxA fee placed on activities that produce carbon dioxide emissions.
• Cap-and-tradeA system that sets a limit on total emissions and allows companies to buy and sell emission allowances.
• Carbon offsetA reduction in greenhouse gas emissions made to compensate for emissions elsewhere.
• Emissions tradingA market-based approach where permits to emit pollutants are bought and sold.
• Social cost of carbonThe estimated economic damage caused by emitting one additional ton of carbon dioxide.

Careers

Roles this can lead toward

Student research

Published policy papers by One Young India delegates — every delegate leaves published under their own name.

• Paying the Climate Debt: The Case for a Carbon Wealth TaxParthvi Kandoi
• Decarbonising India’s Livestock Sector: Policy & Implementation White PaperVihaan Gupta
• The Bottom Line on Green: How Carbon Accountability Unlocks Profit and Competitive AdvantageAradhya Haldikar
• Cosmic Life: Is Only Carbon-Based Life Out There?Swara Patel
• Global Emissions and Carbon Offsetting: Examining Conservational Approaches and Regulatory GapsVinayak Raj
• Ensuring India's Energy Security and Negative Carbon EmissionsBhavya Khushwaha

Threads 5

Where this connects to other fields — and why it's worth knowing.

• Behavioral Economics Economics

  Putting a price on pollution should make people pollute less. But in your head it can backfire: once you've paid to 'offset' a flight, you feel you've earned the right to consume more. So the clever fix can actually push emissions up.

• Religion and Morality Religion

  Some companies pay for 'carbon offsets' so they can keep polluting and still feel clean. Centuries ago, people paid the church a fee to keep sinning and feel forgiven. Same deal: pay a price, feel absolved, change nothing.

• Causal Inference & Experiments Mathematics

  When you pay to protect a forest as a 'carbon offset,' it only counts if those trees really would have been chopped down otherwise. So you're buying a what-if that never happened. And proving a what-if is the hardest thing in all of statistics.

• Satellite Imagery and Remote Sensing Geography

  Companies buy 'permits' to pollute and swear they've cut their emissions, but how do you catch one lying? Satellites can now photograph invisible methane leaking from a single site from space. So making a pollution market actually work turns out to depend on being able to measure cheating from orbit.

• Private Law: Contract, Tort & Property Law

  Cap-and-trade invents a brand-new thing to own: the right to release a ton of pollution into the sky. Then it hands those rights out and lets people buy and sell them. In a way, it fences off a piece of the shared air we all breathe and turns it into private property, all disguised as a clever market fix.