Carbon Pricing Models to Attain ‘Net Zero’

Abstract

Purpose: The objective of the study is to analyze the carbon pricing models that can be used to attain ‘Net Zero’. The paper discusses the top 5 countries that are emitters of CO2 emissions and their commitment towards attaining ‘Net Zero’. The ever-increasing Greenhouse Gases (GHG) emissions due to use of fossil fuels pose a significant risk to global development, sustainability and health. Many countries have announced ambitious targets to achieve ‘Net Zero’ within this century to combat the rising GHG emissions. Carbon pricing models vary from Emission Trading Systems (which can be in the form of baseline-and-credit systems or cap-and-trade) to carbon tax systems. The paper also discusses the recently introduced Carbon Credit Trading Scheme 2023 introduced in India and the way forward.

Design/Methodology/Approach: The paper analyses various studies about carbon pricing models that can be used to attain ‘Net Zero’. In addition, the paper discusses some of the measures taken by other countries to combat GHG emissions.

Findings: Two methods of reducing carbon emissions are discussed- Carbon Tax and Emission Trading System (ETS). Carbon tax model provides certainty on the carbon pricing but it may not significantly curtail emissions as polluters who are willing to pay the tax can emit GHG. On the other hand, ETS, is proven to be more effective in meeting GHG reduction targets but it might result in efficiency losses which can be overcome by allowing trading between GHG emitters and GHG savers.

Originality/Value: Governments across the world have committed to achieve ‘Net Zero’ and carbon pricing models are the core instruments to reach this target. Various countries have/are experimenting with different forms of such carbon pricing models and hence, this topic is highly relevant in today’s discussion to achieve sustainability and reduce global warming.

Paper Type: Theme Based Paper.