Carbon Pricing

Climate change has been called the ‘world’s greatest market failure’, because releasing GHG emissions into the atmosphere has been free, with little economic incentive for alternatives.

A carbon price helps level the playing field between more expensive low-emission projects (ie. wind farms) and cheaper high-emission projects (ie. power generation using fossil fuels like oil and coal).

Governments price carbon indirectly by setting limits on emissions, with penalties for exceeding them. In Europe and North America, regulations on annual GHG emissions are currently restricted to heavy industry and power producers. GHG producers are assigned permits for set amounts of emissions per year. If they reduce emissions below amounts allowed, they can sell their credits to other emitters.

The GHG market determines the price of carbon offsets through emissions trading.  The price for carbon offsets is measured in metric tonnes of carbon dioxide-equivalent (CO2e).