Which policy tool prices carbon?

• A. Carbon pricing
• B. Subsidies for renewables
• C. Performance standards
• D. Research funding

Answer: (A)

Pricing carbon attaches a cost to greenhouse gas emissions, creating a market incentive to reduce them. By establishing a carbon tax or a cap-and-trade system, a price is placed on each ton of CO2 emitted, making fossil fuels more expensive and cleaner options relatively cheaper. This direct price signal encourages businesses and individuals to cut emissions, invest in cleaner technologies, or shift to lower-carbon energy sources. Revenue from carbon pricing can be used to fund climate initiatives or offset other taxes, reinforcing its economic logic.

Subsidies for renewables boost the deployment of clean energy but don’t directly put a price on emissions. Performance standards regulate emissions or efficiency through rules rather than a pricing mechanism. Research funding supports technological development but does not assign a cost to pollution.