Carbon Price Floor Economics

Emissions trading systems ets and carbon taxes.

Carbon price floor economics.

These reforms reduced the amount of free carbon credits available propelling the price on carbon up again to 25 to 30 per ton see figure below. A carbon price the method widely agreed to be the most efficient way for nations to reduce global warming emissions is a cost applied to carbon pollution to encourage polluters to reduce the amount of greenhouse gases they emit into the atmosphere. Carbon price as a key part of the policy framework in the uk and other countries. Carbon pricing presumes that politicians are willing and able to make the case for sustained increases in the price of commodities that are familiar and essential in everyday life.

However the government more recently decided to cap the carbon price floor at 18 08 20 40 till 2021. There are two main types of carbon pricing. In this way the overall environmental goal is achieved in the most flexible and least cost way to society. The carbon price also stimulates clean technology and market innovation fuelling new low carbon drivers of economic growth.

The uk government has introduced a carbon price floor to make the eu trading scheme more effective in cutting co2 emissions. This revenue could be used to fund investment in renewables or help finance improvements in human capital. It usually takes the form either of a carbon tax or a requirement to purchase permits to emit generally known as carbon emissions trading but also called allowances. The cpf was introduced on 1 april 2013 to underpin the price of carbon at a level that drives low carbon investment which the eu ets has not achieved.

Carbon trading raises less revenue than a carbon tax. It is by no means the only policy tool needed but it is essential if a cost efficient and fair solution to the challenge of human induced climate change is to be found. A serious attempt to use carbon prices to that end according to nicholas stern and joseph stiglitz two noted economists would require a price in the range of 40 80 to be levied on all the. But the price of carbon is already rising again thanks to the recovering economy and recent reforms in the european union s emissions and trading system the world s first major carbon market.

The carbon price floor cpf is a uk government policy implemented to support the eu emissions trading system eu ets. The carbon price floor was introduced in 2013 at a rate of 16 18 05 per tonne of carbon dioxide equivalent tco 2 e and was set to increase to 30 33 85 by 2020.