Impact of Carbon Taxation and Climate Finance on Achieving Net Zero

Carbon taxation alone is considered the optimal policy by economists to achieve net zero emissions, yet less than a quarter of emissions are subject to carbon pricing, which is often set too low. In a world with perfect carbon taxes and societal cost pricing, climate finance would be unnecessary. However, the current incomplete and low carbon taxation levels necessitate considerations of climate finance to move towards the optimal solution. Implementing both carbon taxes and climate finance simultaneously can deviate from the most effective solution.