Carbon dioxide (CO2) is a long-lived gas. Almost half of the CO2 emitted in 2013 will still be in the atmosphere a century from now. This means that its concentration, and warming potential, increases over time, unless the rate of accumulation can be cut to zero. This is the goal that the OECD is urging all countries to achieve: zero net emissions by mid-century. To accomplish this, the explicit price of carbon dioxide emissions should be aligned more closely with their true cost, while avoiding expensive policy options that could be replaced by more cost-effective ones.
Today, explicit carbon prices are far too low, and there is insufficient incentive to reduce emissions as a result. In most countries, low taxes on petrol and diesel fail to fully capture the true cost that running a vehicle has on human health and the environment. Where attempts to put an explicit price on carbon emissions have been made, it is often distorted by a number of conflicting policies. For example, the same governments that are trying to cut greenhouse gas (GHG) emissions are providing subsidies to fossil-fuel industries and consumers that are currently estimated at over US$500 billion per year globally. What can governments do to correct this?
First, they need to adopt policies that put an explicit price on carbon. Taxes on carbon emissions or fossil fuels can generate a carbon price, as can emissions trading schemes whereby a “capped” amount of carbon emission allowances are traded in an open market, much like a stock exchange.
See full Article: http://www.oecdobserver.org/news/fullstory.php/aid/4260/Price_the_carbon.html
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