What is carbon pricing?  

Whatever you call it, whatever scheme a government prefers, leaders all over the world are concerned about the amount of carbon dioxide entering our atmosphere.

To halt global warming, severe weather events and health effects from atmospheric pollution we need to stall the growth of carbon emissions and encourage sustainable energy creation without bankrupting the existing energy infrastructure.

Sounds easy! The question is how can we reverse the ship without hitting the iceberg?

Over 40 countries have introduced some kind of carbon pricing mechanism, breaking down into the following two categories:

Emissions Trading Scheme

Emissions Trading Scheme (ETS) is sometimes referred to as a cap-and-trade scheme, and has recently been earmarked by President Obama as his preferred method for reducing carbon pollution in the United States.

By placing a cap on the amount of carbon emissions, industries that use less than their allowance can trade their excess emissions to those that use more than their allowance. The resulting market generates a price on carbon while also encouraging emissions reduction and the uptake of sustainable energy practices.

Carbon Tax

Australian’s should be well aware by now what a carbon tax and how it works. Where the ETS allows companies to trade their excess carbon emissions and allowing the market-based mechanism to price on carbon – a carbon tax results from a government setting a fixed price on carbon emissions.

Industry groups have been vocal in their opposition to carbox taxing as their corporate planning and profit margins are effected by the real and shadow price on carbon schemes.

One of the world’s worst polluters, China has launched pilot emissions trading schemes in four cities and two provinces and, if successful, will roll out further schemes in future.

 

Indirect carbon options include scrapping fossil fuel subsidies or purchasing carbon credits from industries that are in surplus (often referred to as a carbon-offset).