Green Investments in Manufacturing Pathways Through Circular Economy and Sustainable Material Innovations

Carbon pricing has become crucial instrument of climate policy which is used to decarbonize manufacturing industries. Governments internalize environmental externality by imposing a financial cost on the emission of greenhouse gases through carbon taxes or emissions trading scheme and redefine the cost borne by the energy-intensive sectors. The manufacturing sector, which contributes almost a third of the world-wide CO2 emissions is a focus point and a pilot project under consideration of such policies. This chapter examines the impact of carbon pricing on green investment in manufacturing based on economic theory, empirical evidence, and comparative case studies of both developed and emerging economies. The chapter gives the theoretical premise of carbon pricing in detailed inclination on such mechanisms as relative price effect, future-facing investments, and financial channels to green investments. The results in the chapter demonstrate that effective green investment in manufacturing is based on strong policy design, institutional support, and price signals in the long-term.