SAN FRANCISCO, CA / ACCESS Newswire / April 13, 2026 / Neel Somani, a former quantitative researcher who covered power markets at Citadel, is shedding light on a topic that often confuses both consumers and professionals alike: how carbon emissions are actually priced in the United States.

In a recent breakdown, Neel Somani contrasts global approaches to carbon taxation and explains why the U.S. has adopted a more dynamic system known as cap-and-trade, offering a clearer understanding of how environmental policy directly impacts energy markets and, ultimately, consumer costs.

Two Approaches to Carbon Pricing

At a high level, governments typically rely on one of two systems to regulate carbon emissions:

1. Direct Carbon Tax

Some countries, such as Canada, apply a straightforward carbon tax, charging a fixed rate per ton of carbon dioxide emitted.

For example, a government might set a price of $50 per ton of CO₂. While simple in theory, Neel Somani notes that this approach comes with inherent challenges.

"If the price is too low, it doesn't really change behavior," he explains. "Companies may continue emitting carbon because consumers are willing to absorb the added cost."

On the other hand, if the tax is set too high, it can create economic strain without a clear mechanism for balancing supply and demand.

Why the U.S. Uses Cap-and-Trade

Rather than relying on a fixed tax, the United States has largely implemented cap-and-trade systems in key regions. Programs such as the Regional Greenhouse Gas Initiative (RGGI) and California Cap-and-Trade Program illustrate this approach.

Under cap-and-trade, the government sets a limit (or "cap") on total allowable emissions within a given period.

For example:

• A state may determine that 80 million tons of CO₂ can be emitted in a quarter

• It then issues exactly 80 million emissions allowances

These allowances are auctioned off to market participants, such as power plants and industrial operators, who bid based on their expected emissions.

A Market-Driven Pricing Mechanism

Once distributed, these allowances become tradable assets. Companies can buy and sell them throughout the compliance period depending on their operational needs.

This creates a dynamic, market-based price for carbon:

• If demand for allowances is high, prices increase

• If emissions decrease, prices fall

Unlike a fixed tax, this system allows the market to determine the cost of carbon in real time.

"You can actually look up the price," Neel Somani notes, referencing publicly available data for RGGI or California markets. "It fluctuates based on supply and demand."

How Carbon Pricing Affects Power Plants

In practice, carbon pricing is directly embedded into how power plants operate.

When a coal or natural gas plant bids into an electricity market, it must account for:

• The amount of carbon it will emit

• The current price of carbon allowances

This cost is incorporated into the plant's cost curve, which determines whether it will be dispatched to generate electricity.

The result is a system where:

• Higher-emission plants become more expensive to operate

• Cleaner energy sources gain a competitive advantage

"On average, if you emit more carbon, your plant won't run as often," Somani explains.

The Consumer Impact

Although the mechanism operates at the wholesale market level, the effects ultimately reach consumers.

As carbon costs are factored into electricity pricing:

• Utilities pass through some of these costs

• Consumers indirectly pay for emissions through higher energy prices

However, the system also incentivizes long-term reductions in emissions by rewarding efficiency and cleaner technologies.

A Practical Lens from a Quantitative Expert

Neel Somani's explanation reflects his background in quantitative modeling and energy markets. By framing carbon pricing through real-world mechanics, such as bidding strategies and cost curves, he provides a more actionable understanding than traditional policy discussions.

Beyond his experience in power markets, Neel Somani is also the founder of Eclipse, a high-performance blockchain platform powered by the Solana Virtual Machine that has raised $50 million in Series A funding.

A graduate of University of California, Berkeley with a triple major in computer science, mathematics, and business administration, he continues to bridge complex technical domains with accessible education.

Making Carbon Markets More Understandable

As governments and industries continue to navigate the transition toward lower emissions, understanding how carbon is priced becomes increasingly important.

Neel Somani's breakdown highlights a key distinction: while carbon taxes offer simplicity, cap-and-trade systems provide flexibility, leveraging market forces to determine the true cost of emissions.

By translating these systems into clear, real-world terms, Neel Somani is helping demystify one of the most important economic tools shaping the future of energy.

To learn more visit: press@lipschitzstrategies.com

SOURCE: Lipschitz Strategies LLC