Carbon pricing sounds like the simplest solution to the world’s emissions problem: if you want to emit, you have to pay for it. Europe has pioneered carbon pricing efforts with its emissions trading system, but now these efforts are turning out to be insufficient. At the same time, there is a push in the U.S. to utilize carbon pricing as a means of dealing with climate change. But will it work? There are two ways in which carbon pricing policies can be implemented: one is the direct charging of emitters for the carbon dioxide they release, and the other is the so-called cap-and-trade way, which Europe has adopted in its Emissions Trading System (ETS). Basically, the cap-and-trade approach allows emitters a small amount of free emissions, and if they pollute more, they need to either pay for additional allowances or offset the emissions by investing in clean energy. In […]