Economics Carbon Trading Questions
The role of carbon pricing in carbon trading is to establish a financial value for carbon emissions. It sets a price on each ton of carbon dioxide emitted, creating an economic incentive for companies to reduce their emissions. Carbon pricing helps to internalize the cost of carbon pollution and encourages the adoption of cleaner technologies and practices. In carbon trading, companies can buy and sell carbon credits, which represent a certain amount of emissions. The price of these credits is determined by the carbon pricing mechanism, such as a carbon tax or a cap-and-trade system.