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October 17, 2012
Carbon pricing is any government policy that puts a price on carbon emissions. Carbon pricing can take the form of a tax or a market-based mechanism, such as an emissions trading scheme. Since Finland introduced the world’s first carbon tax in 1990, many governments have implemented or proposed some form of carbon pricing, as shown in the figure below.
In an emissions trading scheme (also known as a cap and trade system), an overall cap is placed on carbon dioxide (CO2) emissions. This cap can be lowered incrementally until it reaches a specified target level. Parties responsible for CO2 emissions, such as electricity generators or fuel refiners, obtain allowances (also called permits) to emit a specific amount of CO2 within the cap. These allowances can either be distributed through an auction or freely allocated. Should a participating member of an ETS emit more than the amount of allowances it owns, it must purchase more allowances. These can be purchased from other emitters who do not need all of their allowances and are thereby able to sell off unused ones. The price of emissions allowances is determined by the free market.
European Union Emissions Trading Scheme (EU ETS)
Regional Greenhouse Gas Initiative (RGGI)
Switzerland Emissions Trading Scheme
Tokyo Cap and Trade Program
Western Climate Initiative
China
South Korea
A carbon tax can take several forms. The most common type is a tax on fossil fuels, such as gasoline, heating oil, natural gas or coal, for their carbon content. Taxes also can take the form of a per kilowatt-hour (kWh) tax on electricity consumption.
Canada
Alberta
British Columbia
Quebec
Costa Rica
Denmark
Finland
Germany
India
Ireland
Netherlands
Norway
South Africa
Sweden
Switzerland
United Kingdom
Carbon Reduction Commitment (CRC) Energy Scheme
Climate Change Levy
United States
Boulder, Colorado
California Bay Area
Australia Emissions Trading Scheme
New Zealand Emissions Trading Scheme
Author: Daniel Querejazu Editor: Blaise Sheridan Map Design: Rebecca Kreutter
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