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alton Hurn: Attempt 1 Question 7 (1 point) Carbon tax and the cap-and-trade: a) Are forms of carbon pricing b) Are more cost effective than regulatory measures based on source-specific limits c) Theoretically produce more emissions reduction per unit of expenditure than other types of polices such as renewable resource subsidies O d) All of the above are correct

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a) Are forms of carbon pricing


Carbon pricing is a tool that captures the external costs of greenhouse gas (GHG) emissions—costs that the general public bears, such as crop damage, health-care costs from heatwaves and droughts, and property loss from flooding and sea-level rise—and ties them to their sources through a price, usually in the form of a price on CO2 emitted. A carbon price serves to reassign blame for the harm produced by GHG emissions to those who are accountable for and can mitigate it.


Rather than mandating who, where, and how emissions should be reduced, a carbon price sends an economic signal to emitters, allowing them to choose between changing their activities and lowering their emissions or continuing to emit and paying for their emissions. As a result, the overall environmental aim is met in the most flexible and cost-effective manner possible for society. In order to incorporate the external cost of climate change in the broadest possible spectrum of economic decision-making and to set economic incentives for clean growth, an effective price on GHG emissions is critical. It has the potential to assist mobilize the financial resources needed to support clean technology and market innovation, resulting in new, low-carbon economic growth drivers.


A carbon tax puts a price on carbon by establishing an explicit tax rate on greenhouse gas emissions or, more typically, the carbon content of fossil fuels, i.e. a price per tCO2e. It differs from an ETS in that the carbon tax's emission reduction effect is not pre-determined, but the carbon price is. Each year, a cap-and-trade program issues a certain number of emissions "allowances."

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What is carbon pricing? (n.d.). Carbon Pricing Dashboard | Up-to-date overview of carbon pricing initiatives.