What is a carbon price – and what is a carbon market?
Professor David Veredas explains these concepts – and how they help companies to reduce carbon emissions
By David Veredas
Professor of Financial Markets
What is a carbon price? And what is a carbon market? David Veredas, Professor of Sustainable Finance at Vlerick Business School, often receives this question from companies. In this ‘What Is’ video, he explains both concepts. He also talks about the four types of carbon prices. He concludes by underscoring the ultimate goal, which is to induce transformative change and reduce carbon emissions.
A carbon price is a cost applied to greenhouse gas emissions. A carbon market is a system in which carbon credits – also known as permits or allowances – are bought and sold.
What is a carbon price – and what is a carbon market?
In this 'What Is' video, Professor David Veredas explains these concepts – and how they help companies to reduce carbon emissions.
There are essentially four different types of carbon prices.
- The internal carbon price is used for insetting or decarbonising the internal operations of a company.
- A second carbon price is the price from the voluntary carbon market. These are used for offsetting a company’s emissions.
- A third carbon price is the so-called compliant price, which can be either determined via taxes or through the emission trading system.
- The fourth type of price is the social cost of carbon, which is used by public policymakers for evaluating the cost and benefit of, for instance, new infrastructure projects.
Whatever market or price that we use, the overarching aim is the same, which is to induce change. Induce change that reduces emissions through investments in infrastructure, equipment, or technology – or through changes in business models.