CO2priser

CO2priser are price signals applied to carbon dioxide emissions to reflect the social and environmental costs of emitting greenhouse gases, and to steer economic activity toward lower emissions. They are a central component of many climate policies and can be implemented through carbon taxes or emissions trading schemes (ETS).

A carbon tax sets a fixed price per ton of CO2 emitted, providing price certainty for investors and households while allowing emissions to respond to the tax level. Its main drawback is that the ultimate emissions outcome is less certain. An ETS, by contrast, caps total emissions and lets the market set prices for allowances; the price can fluctuate with supply and demand. Some programs introduce price floors or ceilings to stabilize the signal.

Globally, CO2 prices vary by jurisdiction. The European Union Emissions Trading System is the largest, followed by programs in the United Kingdom, California, and China. Revenue from carbon pricing may be used to fund green investments, reduce other taxes, or return to citizens through rebates.

Prices influence decisions in energy, transport, and industry by making fossil fuels more expensive relative to low-carbon options, promoting efficiency, innovation, and the deployment of clean technologies. They can also raise concerns about competitiveness and energy affordability, prompting policy measures such as border carbon adjustments or targeted support for affected households and sectors.

Despite progress, challenges remain, including setting appropriate price levels, avoiding leakage, and ensuring equitable outcomes. CO2 pricing is typically most effective as part of a broader portfolio of climate policies, including standards, subsidies for clean technologies, and public investment in infrastructure.