ABSTRACT
Various economic (including market failure), natural (law of entropy) and legal (breakdown of property right structure) factors cause over-exploitation of the ecosystem. Various approaches such as the Pigouvian taxation principle, Coasian property right and standard emission principles and the non-economic approach such as Garret Hardin’s coercive method of the government and market-based approaches, i.e., effluent charges (carbon tax) and transferable emission credits, play a significant role in controlling pollution and restoring the natural ecosystem. However, each of these approaches has its own limitations in controlling pollution levels, especially in developing economies. This chapter analyses the significance of recently introduced carbon pricing as a market-based mechanism for controlling pollution and consequent climate change. Carbon pricing has been widely accepted in many developed nations, especially European countries; however, it also lacks social acceptability in many developed and developing nations. It has failed to get universal acceptability because of diversified political, economic and social system across nations. Political domination with short-term political goals, mainly by developed nations, makes it difficult for the global government to achieve target-based reductions of GHGs. Therefore, multiple approaches are needed in order to achieve long-term sustainable socio-economic development globally.
