Introduction to Carbon Pricing and Emissions Trading

📋 Course Outline

1. Carbon taxation
2. Emission trading systems
3. Cap-and-trade mechanics
4. Price signals and market design
5. Major emissions trading programs

📖 1. Carbon taxation

🔑 Key Concepts & Definitions

• Carbon tax rate: A carbon tax rate is the fixed government price set per ton of emitted greenhouse gas.
• Explicit price for GHGs: An explicit price for GHGs is a direct per-ton charge that turns emissions into a measurable cost.
• Pass-through to consumers: Pass-through to consumers is the extent to which firms transfer carbon costs to end-product prices.

📝 Essential Points

• A carbon tax is a fixed per-ton payment imposed on entities that emit carbon under government rules.
• Effectiveness depends on the tax rate, demand elasticity for affected products, and how much costs firms can pass to consumers.
• A carbon tax provides predictability because the emission price is set directly rather than emerging from trading.

💡 Memory Hook

Tax = fixed fee per ton, so emissions become a known bill.

📖 2. Emission trading systems

🔑 Key Concepts & Definitions