In many countries carbon pricing has become a key part of the journey to decarbonisation. Currently, the World Bank reports that there are 64 carbon pricing initiatives around the world which have either been implemented or are scheduled for implementation. Recently there have also been calls for a worldwide coalition for carbon pricing. At their core, carbon pricing mechanisms ensure that “polluters pay” by setting a price on CO2 or equivalent ( CO2-eq) emissions. However, there is a diversity of approaches to setting a carbon price; the most popular alternatives are carbon taxes and “emissions trading systems” ( ETS). Carbon tax. A carbon tax fixes the carbon price (e.g., requiring emitters to pay per tonne of CO2-eq emitted). As emitting becomes expensive, there will be an incentive to reduce emissions. If the cost of reducing emissions becomes lower than paying the tax, then emitters will profit from reducing emissions and investing in clean projects. As the tax increases, aggregate emissions will decrease. However, as there is no overall limit on emissions, the exact amount of emissions reductions is uncertain.