Carbon Pricing and Emission Reduction Strategies

This lecture discusses the implications of applying a carbon price on emissions, highlighting how different sources may be exempt from paying the carbon tax, leading to a burden on other sectors to reduce emissions. The instructor explains how exempting certain low-cost sources from contributing to emission reduction targets can result in higher overall costs. The lecture delves into the concept of marginal abatement cost curves and the efficiency of market-based instruments in achieving emission reductions at minimum cost. It also explores the challenges of aligning subjective and objective mitigation costs, the importance of co-benefits in climate policy, and the need for a mix of interventions to effectively reduce emissions. The lecture concludes by emphasizing the necessity of transitioning to sustainable technologies to avoid stranded assets and achieve ambitious climate goals.