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“By raising energy prices overall, carbon pricing creates incentives for households and firms to shift toward greener options, while promoting energy efficiency, boosting green investments and spurring innovation”, Elucidate.

Topic: Carbon Credit

5. “By raising energy prices overall, carbon pricing creates incentives for households and firms to shift toward greener options, while promoting energy efficiency, boosting green investments and spurring innovation”, Elucidate. (250 words)

Reference:  Economic Times

Why the question:

The article is amidst the growing consensus that carbon pricing was the most efficient and cost-effective way to curbing emissions.

Key Demand of the question:

Explain in what way carbon pricing creates incentives for households and firms to shift toward greener options.

Directive:

Elucidate – Give a detailed account as to how and why it occurred, or what is the particular context. You must be defining key terms where ever appropriate, and substantiate with relevant associated facts.

Structure of the answer:

Introduction:

Start with what carbon pricing is.

Body:

The answer body must have the following aspects covered:

Explain the concept of carbon pricing. A carbon price gives an economic signal to polluting businesses to reduce and eventually discontinue their harmful activities emitting CO2 and other GHG. In this way, carbon pricing aims to stimulate the development of new, greener, more efficient, low-carbon technologies.

Discuss the merits and demerits of it.

Carbon pricing helps express carbon emissions in monetary terms which makes it relatively simpler for businesses to incorporate this figure into their financial planning and strategies. Carbon price helps shift the burden for the damage back to those who are responsible for it, and who can reduce it.

Carbon price as a planning tool helps identify revenue opportunities and risks to reduce costs, emissions and guide capital investment decisions. For businesses, it can mean gradually transforming into a greener and sustainable model, which in all likelihood, is the way for the future.

Conclusion:

Conclude with importance.

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