Chapter 6: Pricing Climate Change

Burning of fossil fuel is the main reason behind manmade climate change. By burning the carbon content, carbon dioxide is produced and quickly spreads in the global atmosphere. This increases the greenhouse effect, thereby changing the earth’s energy balance. Concern over the negative consequences of climate change has led to a vast array of policy measures aimed at reducing the use of fossil fuel. This chapter examines some aspects of these policies. It discusses the arguments for taxes and quantity restrictions on CO2-emitting activities, and especially on the burning of fossil fuel, as well as policies to subsidise substitutes for these activities, particularly the use and development of technologies producing non-fossil based “green energy”.