Implications and Challenges of Carbon Pricing

Abstract

With the global climate crisis looming, the public look forward to the Paris Agreement setting countries on a new path to reduce global warming. Carbon pricing policies are the most cost-effective or "first-best" response to climate-related externalities and are a way to achieve greenhouse gas reductions across countries. This paper first introduces the mechanism and classification of carbon pricing in detail, then reviews the influence of carbon pricing in the field of energy and finance, and finally sorts out the existing challenges of carbon pricing. In energy, carbon pricing will promote the transformation of traditional coal energy to clean energy. In the financial field, the combination of carbon pricing with carbon finance and carbon market will help the implementation of carbon pricing policies. At the same time, carbon pricing faces some challenges in political environment, citizen acceptance, international unified normative system, and other aspects. Although there are still some challenges, carbon pricing plays an indispensable role in climate policy implementation and research and global sustainable development. It is foreseeable that carbon pricing has broad prospects in measures to reduce carbon dioxide emissions and combat climate change.