Carbon Pricing Mechanism

A Carbon Pricing Mechanism is a policy tool that charges businesses or individuals a cost for emitting carbon dioxide, a greenhouse gas that contributes to climate change. This incentivizes reducing emissions by making emitting more expensive, encouraging cleaner energy use and innovation in eco-friendly technologies. It can take the form of a carbon tax, which directly sets a price per ton of CO₂, or cap-and-trade systems, which limit total emissions and allow trading of emission permits. The goal is to promote responsible environmental practices while generating revenue that can support sustainable development.