Pricing Pollution: an Approach to Support Green Energy Growth

Curbing pollution and limiting global temperature rise is a necessity now. The Paris Agreement presented a platform from where initiatives for climate protection can be mutually taken by countries of the world.

However, consider these facts –

  • Global energy supply through fossil fuels have reached from 6,100 million tonnes of oil equivalent (Mtoe) in 1977 to 13,700 Mtoe by 2014.
  • Global energy related CO2 emissions are estimated to increase at an average of 1.0% from 2012 to 2040.
  • From coal combustion alone, Asia’s CO2 emission is estimated to rise more than 2.2 billion metric tons in the future.
  • Renewable energy (mainly solar) has reduced fossil fuel share by 22 per cent.
  • 1 KW of green energy can reduce more than 3,000 pounds of CO2 annually.

We can come to a conclusion that green energy revolution is a necessity to stop climate degradation. And although it offers a reprieve from climate issues, countries working towards green energy transition is not enough to stop the spread of pollution from distorting the future of the world (dust and particulate matter (PM) may be reducing energy yield by 17-25 per cent annually in Northern parts of India and solar panels in Baghdad were seen to be producing less and less energy due to dust particles blocking the sunrays). We must take positive action towards reducing the pollution as well.

Carbon pricing or Pollution pricing can act as an efficient tool to reduce pollution, aiding green energy transition and climate restoration.

Carbon Pricing Or Pollution Pricing

Pricing pollution is quickly becoming one of the most important and promising methods of curbing pollution from the world. Business groups, investors- like The World Bank have made strides to encourage Governments and corporations to put a price on carbon to drive down emission, while speeding up green energy transition.

Why Supporting Pollution Pricing Is Necessary?

Price on carbon can shift the burden of the damage to environment and life through occurrences such as- health care costs from heat waves, damage to crops, damage to property and life due to droughts of flooding and sea level rise. By imposing tax on pollution production, these environmental issues can be reduced. The revenue generated from the taxation can be used to boost green energy transition, thus phasing out fossil fuels, which are the major contributors to pollution. This can serve as the most cost effective way of promoting climate protection and green energy generation. The carbon pricing can also support green energy market innovation through low-carbon drivers of economic growth.

Types Of Carbon Pricing

There are primarily two types of carbon pricing methods. Emissions trading systems (ETS) and Carbon Taxes.

Emissions trading systems (ETS)– are sometimes referred as cap-and-trade system, it imposes caps on the total amount of green house gas emissions and lowers the cap over time. Through this system, companies are extended emission permits. The purpose of ETS is to establish a market price for green house emission; and caps ensure that emitters keep to their emission levels, considering their pre-allocated carbon budget.

Carbon Tax– This system sets a price for carbon directly by establishing a tax rate on carbon content of fossil fuels or greenhouse gas emissions.

Depending on the economic and environmental standings, a country can select one of these components to restrict its carbon emissions. As it will promote green energy adoption, and climate betterment, carbon pricing will need additional policies for support.

  • Some of examples of complementary policies include- setting fuel/energy efficiency standards for vehicles, buildings, heating and cooling systems.
  • Offering tax breaks for energy efficiency improvements, auto feebates.
  • Setting renewable portfolio standards and mandates for having a share of renewable energy within energy mix.
  • Enforcing laws to stop de-forestation.

More than 40 countries like- The US, Germany, Chile, Brazil, and some of the EU countries have already implemented or in process of implementing these policies to support Carbon pricing.

Exceptional Examples

Estimating that carbon pricing could reduce pollution by 80 to 90 million tonnes by 2022, US states like California have introduced state-wide policies in support of carbon pricing.

Climate awareness in Canada has seen nearly 97% of its residents to commit towards pricing carbon pollution. Provinces like Quebec and Ontario in Canada have implemented cap-and-trade systems- enforcing to get permits for carbon pollution, curbing the pollution rate.

India Walking Towards Success

To support solar energy growth in India, the country is also implementing supporting policies like carbon pricing. And as a result In 2017, 40 Indian companies out of 139 companies in Asia have put price on carbon.

Government of India’s initiative towards Perform-Achieve-Trade (PAT) policy for energy efficiency, and renewable energy certificate scheme have also supported carbon pricing. World Bank and the Government of India are working together to explore a domestic carbon market in micro, small, and medium enterprises.


Carbon pricing provides emitters financial incentive for choosing green energy solution as it will generate energy without levying taxes. And with the world, India is working towards restoring the climate by selecting green energy and initiatives that speed up transition from fossil fuel. However, considering the rapid growth of population and pollution, world wide efforts need to be increased to see expected results.




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