Measures
Putting a price on carbon will help to reduce the investment gap
There are two main mechanisms for carbon pricing – emission trading schemes (cap and trade) and carbon taxation. Emission trading systems place a cap on CO2-e emissions and allow participants to trade an allowance of CO2-e emissions under the cap. The mechanism results in a wealth transfer from high-emission to low-emission technology proponents, increasing the attractiveness of low-emission technology investments.Putting a price on carbon can significantly ease the burden of additional investment in transitioning to the coal phase-out scenario. An analysis has shown that the need for additional investment can be eliminated with a carbon price of US$20.2 per ton of CO2-e. This estimate has been based on the additional investment of US$68 billion for transitioning to the coal phase-out scenario, compared to the current policy scenario. Fund-raising from the carbon price has been estimated by using the total CO2-e emissions in the coal phase-out scenario (3,372 MtCO2-e during 2019-2030).
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