Carbon pricing is an approach to reduce Greenhouse gas emissions (also referred to as carbon emissions) with the use of market mechanisms to pass the cost of emitting on to emitters. The main aim behind development of this concept and related mechanisms is to encourage use of sources of renewable energy and discourage the use of conventional sources of energy which lead to massive emission of GHGs in order to protect the environment.
Carbon pricing is based on a pivotal principle that is "polluter pays", which means society can hold emitters responsible for the serious costs of adding GHG emissions to the atmosphere(negative externality); these costs include polluted air, warming temperatures, threats to public health and to food and water supplies, increased risk of certain dangerous weather events by putting a price on carbon.
Benefits of Carbon Pricing
The benefits of carbon pricing are very significant. It is one of the strongest policy instruments available for tackling climate change. It has the potential to decarbonize the world’s economic activity by changing the behavior of consumers, businesses, and investors while unleashing technological innovation and generating revenues that can be put to productive use. In short, well-designed carbon prices offer triple benefits: they protect the environment, drive investments in clean technologies, and raise revenue.