Why this matters now
Carbon pricing, Article 6 markets, India’s carbon-trading scheme and the climate-finance debate (developed vs developing) are highly topical GS-3 climate-economics themes.
Carbon pricing
Carbon pricing makes polluters pay for emissions. The two main tools: a carbon tax (a fixed price per tonne of CO₂) and cap-and-trade / emissions trading (ETS) — a cap on total emissions with tradable permits. Carbon credits/offsets represent verified emission reductions that can be traded.
Carbon markets and Article 6
Carbon markets can be compliance (mandatory, e.g. the EU ETS) or voluntary. Article 6 of the Paris Agreement enables international carbon trading and cooperative mechanisms. India is rolling out the Carbon Credit Trading Scheme (CCTS), building on the earlier PAT (Perform, Achieve, Trade) energy-efficiency scheme and renewable certificates.
Climate finance
Climate finance funds mitigation and adaptation, especially for developing countries (the principle of common but differentiated responsibilities). Mechanisms include the Green Climate Fund (GCF), Global Environment Facility (GEF) and the Loss and Damage Fund. A key debate is the unmet developed-country pledge (the $100 billion/year goal and the new collective quantified goal).
UPSC angle
Know carbon tax vs cap-and-trade, carbon credits, Article 6, India’s CCTS (and PAT), and climate-finance mechanisms (GCF, GEF, Loss & Damage) plus the $100bn/CBDR debate.
Frequently asked questions
What is carbon pricing?
Putting a price on greenhouse-gas emissions, mainly through a carbon tax or a cap-and-trade (emissions-trading) system.
What is the difference between a carbon tax and cap-and-trade?
A carbon tax sets a fixed price per tonne of CO₂; cap-and-trade sets a total emissions cap and lets firms trade permits.
What is India’s carbon market?
The Carbon Credit Trading Scheme (CCTS), which builds on the earlier PAT energy-efficiency scheme.
What is climate finance?
Funding for mitigation and adaptation, especially for developing countries, via mechanisms like the Green Climate Fund and the Loss and Damage Fund.