The chapter by Shoibal Chakravarty and E. Somonathan focuses on coal, which accounts for a whopping 64% of India’s CO2 emissions in 2021. Since coal combustion also releases other deadly pollutants and particulates, its elimination would have collateral local environmental benefits. The current tax accounts for 20–40% of the price of coal paid by coal-burning power plants, which the authors consider to be well below the level  which would internalise even the local component of the pollution externality.

The climate targets agreed upon in the Paris Agreement will eventually need to be backed by ambitious climate policies. Putting a price on carbon and abolishing subsidies on fossil fuels is usually widely agreed upon by economists to be the economically efficient solution (High-Level Commission on Carbon Prices 2017). An increasing amount of countries, including low- and middle-income economies (LMICs), have already introduced (or plan to do so) carbon pricing schemes.