ABSTRACT
This chapter documents various aspects of carbon price and opens the debate on the utopia of uniform pricing proposals. Climate economics is linked to other economic disciplines. Understanding the essentials of economics enhances the debate about its most central climate policy tool, carbon pricing. In the 1960/70s environmental economics emerged as an offspring of welfare economics, itself indebted to microeconomics. Hence, climate economics is rooted in microeconomics. In 2019 a Market Stability Reserve (MSR) mechanism started, after long discussions how it would function. MSR adjusts the volume of permits in the market for controlling the exchange/ auction prices. ‘Financial incentives’ is a generic term, including all measures that could change or do change the financial position of an addressed party. Pricing conquered the pole position in the neoclassical economics discourse by the theory of value, with competitive markets maximizing the sum of consumer and producer surplus.
