What are the differences between carbon pricing and cap-and-trade?

What are the differences between carbon pricing and cap-and-trade?

Carbon pricing is a broad term that includes various methods to charge for carbon emissions, while cap-and-trade is a specific system that sets a limit on emissions and allows trading of permits.

Can you explain how cap-and-trade works?

Sure! In a cap-and-trade system, a government sets a cap on total emissions and issues permits that allow companies to emit a certain amount. Companies can buy and sell these permits, creating a financial incentive to reduce emissions.

What are the advantages of carbon pricing?

Carbon pricing encourages companies to innovate and reduce emissions, leading to cleaner technologies and practices. It also generates revenue that can be used for environmental projects.

Are there any downsides to cap-and-trade?

Yes, some downsides include the potential for market manipulation and the complexity of monitoring emissions. Additionally, if the cap is set too high, it may not effectively reduce emissions.