Which mechanism directly prices carbon emissions to encourage reductions?

• A. Subsidies
• B. Grants
• C. Carbon taxes
• D. Regulations

Answer: (C)

Directly pricing carbon emissions creates a cost per unit of CO2 released, giving emitters a clear financial incentive to cut emissions. A carbon tax does this by charging a set amount per ton of carbon dioxide emitted. That price signal makes fossil-fuel use more expensive and cleaner options more attractive, prompting businesses and households to reduce emissions, improve efficiency, or switch to lower-carbon energy.

Subsidies reduce the cost of particular low-emission technologies or actions, but they don’t attach a universal price to emitting. Grants fund specific projects, again influencing decisions without pricing emissions themselves. Regulations impose rules or standards that require reductions, relying on compliance rather than a market price to drive behavior.