PRICE LEVELS IN THE GREEN ECONOMY AND THEIR APPLICATION

Аннотация

The transition to a green economy necessitates a comprehensive understanding of price levels and their applications to effectively balance economic growth with environmental sustainability. This article explores the mechanisms of carbon pricing, including carbon taxes and emissions trading systems, and their roles in internalising environmental externalities. The article goes on to examine the economic implications of these pricing strategies, including potential inflationary effects and the need for substantial investments estimated at an additional $3.5 trillion annually to achieve net-zero emissions by 2050. The discussion also highlights the importance of aligning prices, subsidies, and incentives with true societal costs to promote sustainable development. By analysing these factors, the article provides insights into how price levels can be strategically applied to facilitatethegreen transition. Keywords: Green economy, carbon pricing, carbon tax, emissions trading system, environmental externalities, sustainable development, net-zero emissions, investment, price incentives. The green economy is predicated on the dual objectives of fostering economic growth while ensuring environmental sustainability and social inclusivity. A pivotal aspect of this objective is the implementation of pricing mechanisms that accurately reflect the true costs of environmental impacts. Such mechanisms are designed to incentivize businesses and consumers to adopt greener practices. This article will explore the various aspects of price levels within the green economy and theirpractical applications. Carbon Pricing Mechanisms A foundational approach to integrating environmental costs into economic activities is through the implementation of carbon pricing. This strategy assigns a monetary value to greenhouse gas emissions, thereby encouraging emitters to reduce their carbon footprint. The two primary mechanisms for implementing carbon pricing are carbon taxes and emissionstrading systems (ETS). Carbon pricing is a market-based strategy that aims to internalise the external costs of greenhouse gas (GHG) emissions, thereby incentivising emitters to reduce their carbon footprint. The two primary mechanisms for carbon pricing are carbon taxes and emissions trading systems (ETS), each with distinctstructures and implications. Carbon Taxes A carbon tax is a direct imposition of a fee on the carbon content of fossil fuels or on GHG emissions themselves. This approach ensures price certainty, enabling businesses to factor these costs into their financial planning. Nevertheless, the precise reduction in emissions resulting from a carbon tax can be uncertain, as it is contingent on the responses of producers andconsumers totheincreased costs. Emissions Trading Systems (ETS) .An ETS, also referred to as a cap-and-trade system, http://www.internationaljournal.co.in/index.php/jasass 109 Volume15 Issue02, February2025 Impact factor: 2019: 4.679 2020: 5.015 2021: 5.436, 2022: 5.242, 2023: 6.995, 2024 7.75 establishes an upper limit (cap) on the aggregate volume of greenhouse gas (GHG) emissions, and allocates or auctions off emission allowances to corporate entities. Firms that curtail their emissionsbelow their assigned allowances can sell thesurplus permits to others, thereby creating a financial incentive for emission reductions. This system is designed to ensure a specific environmental outcome by controlling the total level of emissions, but it can also lead to price volatility, which may create uncertainty forbusinesses planning their investments. Global implementation and challenges. In recent years, the proportion of global greenhouse gas (GHG) emissions subject to carbon pricing mechanisms has increased from 5% in 2010 to approximately 22%, representing a substantial rise. The European Union's Emissions Trading System (EU ETS), for instance, has been instrumental in reducing emissions within the EU. However, the implementation of carbon pricing varies worldwide, with some major emitters yet to adopt such measures. The challenges associated with the implementation of carbon pricing mechanisms include the establishment of appropriate price levels, the consideration of potential economic impacts, and the assurance of global cooperation to prevent issues such as carbon leakage, where businesses relocate to regions with less stringent emissionconstraints. One of the most significant hurdles is the political resistance stemming from concerns over national sovereignty and economic competitiveness. Countries with heavy reliance on fossil fuels may perceive carbon pricing as a threat to their economic interests, leading to reluctance in adoption. Furthermore, apprehensions regarding diminished industrial competitiveness may impede nations from implementing carbon pricing unilaterally, as industries may seek to relocate to regions characterised by less stringent regulations – a phenomenon termed 'carbon leakage. The equitable distribution