REVIEW OF CARBON PRICING MECHANISMS: EFFECTIVENESS AND POLICY IMPLICATIONS

The escalating threat of climate change has intensified the need for robust strategies to reduce greenhouse gas emissions. Carbon pricing mechanisms have emerged as pivotal tools in this endeavor, aiming to internalize the external cost of carbon emissions and incentivize cleaner, more sustainable practices. This review provides a comprehensive analysis of various carbon pricing mechanisms, evaluating their effectiveness and exploring the policy implications for future implementations. The review categorizes carbon pricing mechanisms into three main types: Carbon Taxes, Cap-and-Trade Systems, and Hybrid Approaches. Each mechanism is examined in terms of its characteristics, case studies from jurisdictions that have implemented them, and a critical assessment of their effectiveness and challenges. The paper evaluates the impact of carbon pricing mechanisms on economic sectors, assessing their influence on industry and their role in stimulating innovation. Furthermore, it scrutinizes the effectiveness of these mechanisms in achieving emission reductions, considering their impact on greenhouse gas emissions. Additionally, the review delves into the social and distributional impacts of carbon pricing, analyzing its equity aspects and identifying potential challenges. Drawing from implemented policies, the review extracts valuable lessons and insights. It explores the integration of carbon pricing with other climate policies, examining synergies and coordination possibilities. The discussion also includes the potential for global cooperation and harmonization, recognizing challenges and opportunities for aligning international efforts. As a forward-looking aspect, the paper explores innovative approaches to carbon pricing, considering technological advancements and market-based solutions. It concludes with policy recommendations aimed at enhancing the effectiveness of carbon pricing mechanisms, addressing challenges, and providing insights for policymakers and stakeholders. This review consolidates current knowledge on carbon pricing mechanisms, shedding light on their effectiveness and unveiling important policy implications. By synthesizing lessons learned from implemented policies, the paper contributes to the ongoing discourse on effective climate change mitigation strategies, emphasizing the role of dynamic, adaptable, and equitable carbon pricing mechanisms. Keywords: Carbon Pricing, Mechanisms, Climate change mitigation, Effectiveness, and Policy Implications.