Carbon Pricing 101

The document defines carbon pricing as a market-based strategy to internalize the costs of climate impacts, driving a shift toward a clean energy economy. It details two primary mechanisms: cap-and-trade, which limits total emissions through tradable allowances, and carbon taxes, which set a fixed fee per ton of carbon. The text emphasizes that while both can effectively reduce emissions, they require complementary policies and careful design to address equity concerns, such as the regressive impact on low-income households and the economic transition for fossil-fuel-dependent communities. It highlights existing examples like the EU-ETS and RGGI, and suggests that revenues from these programs can be used for rebates, clean energy investment, or deficit reduction.

• Carbon pricing is a market-based approach designed to make carbon emissions cost money, thereby encouraging producers and consumers to adopt low-carbon technologies and products by incorporating climate risks into business costs.
• There are two primary methods for implementing carbon pricing: cap-and-trade, which sets a limit on total emissions and allows the market to determine the price of permits, and carbon taxes, which set a fixed fee per ton of emissions to incentivize reductions.
• Revenues generated from carbon taxes or auctioned allowances can be used for various purposes, including offsetting energy costs for low-income households, funding worker transition assistance, investing in renewable energy, or providing per capita dividends to citizens.
• Effective carbon pricing requires addressing equity issues, specifically the regressive nature of energy price increases on low-income groups and the continued pollution in burdened neighborhoods if some fossil fuel plants are permitted to keep operating.
• Several jurisdictions have already implemented carbon pricing, including the European Union's Emissions Trading Scheme (launched in 2005), British Columbia's carbon tax (2008), and the Regional Greenhouse Gas Initiative in the Northeast and Mid-Atlantic United States.

APA

Union of Concerned Scientists (2009). Carbon Pricing 101. https://www.ucs.org/resources/carbon-pricing-101

Chicago

Union of Concerned Scientists. Carbon Pricing 101. 2009. https://www.ucs.org/resources/carbon-pricing-101.

Wikipedia

{{cite report |author=Union of Concerned Scientists |title=Carbon Pricing 101 |date=17 July 2009 |url=https://www.ucs.org/resources/carbon-pricing-101 |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{unionofconcernedscientists2009carbon, author = {{Union of Concerned Scientists}}, title = {{Carbon Pricing 101}}, institution = {Union of Concerned Scientists}, year = {2009}, month = jul, url = {https://www.ucs.org/resources/carbon-pricing-101}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }