Fixing the carbon price
Fixing the carbon price
This chapter discusses carbon pricing, which implies that the inputs with a lot of embedded carbon which a company uses to make things and deliver services will become more costly. Companies will therefore strive to substitute carbon-intensive inputs for non-carbon inputs. Politicians may oppose carbon pricing when it exposes the technologies they have supported. The aim of a market-based mechanism such as the carbon tax is to change the incentives on both the demand and supply sides. In order to be effective, it needs to be targeted as close to the externality as possible. The border carbon tax provides a fairer way of distributing the costs. With a carbon price in place, focused on what matters the market would then be properly incentivized to start the serious business of decarbonizing.
Keywords: carbon pricing, carbon, carbon-intensive inputs, non-carbon inputs, decarbonizing, costs
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