Which one of the following statements best describes the 'carbon

Which one of the following statements best describes the ‘carbon price’?

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It is the cost of carbon emissions per unit of time.

It is the price paid for carbon credits in a cap-and-trade system.

It is the economic value put on greenhouse gas emissions.

It is the price of gasoline and diesel fuel which is heavily taxed by the government.

Answer is Right!

Answer is Wrong!

This question was previously asked in

UPSC CAPF – 2010

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‘Carbon price’ is an economic instrument that puts a monetary value on greenhouse gas (GHG) emissions. This value represents the cost of the environmental damage caused by emitting one additional unit of GHGs. It aims to make emitters pay for the external costs of their pollution, thereby incentivizing them to reduce emissions. While the price of carbon credits in a cap-and-trade system (B) is a *method* of establishing a carbon price, and taxing fuels (D) can incorporate a carbon price component, the definition (C) “the economic value put on greenhouse gas emissions” best describes the concept of carbon price itself.

Carbon pricing is a policy tool designed to use market mechanisms to mitigate climate change by reflecting the cost of emissions in the price of goods and services.

Carbon pricing mechanisms include carbon taxes (a direct tax on emissions) and cap-and-trade systems (setting a limit on total emissions and allowing emitters to trade permits). The carbon price should ideally reflect the social cost of carbon.

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