Carbon pricing refers to mechanisms that put a price on greenhouse gas (GHG) emissions. These include those that internalise the costs of and thereby disincentivise, GHG emissions such as carbon taxes and emissions trading systems. These also include carbon offset schemes that enable investors to financially support emission reductions or removal projects and claim the emission savings towards their own decarbonisation efforts. These are described in Table 1 below:
Carbon pricing can work as an important policy lever to accelerate economy-wide decarbonisation. Given India’s plans for achieving net-zero emissions by 2070 as announced by the Prime Minister at COP26, policymakers could consider an appropriate form of carbon pricing that sets India on course to meet this objective.7 The relevance of carbon pricing for corporate decarbonisation is explained in the CEF analysis here.
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