Discussion on Carbon Tax

Carbon tax (CO2 tax) serves as an environmental fee that the governments levied on the fossil fuels’ production, distribution and use. The tax amount varies and is based on how much carbon dioxide every kind of fuel releases as it is utilised in: running power plants or factories; driving vehicles; and giving electricity and heat to businesses and homes.

Carbon tax is a tax on pollution. In economics, externalities are the benefits or costs made by the production of goods and services. Negative externalities pertain to unpaid costs. When homeowners, businesses and utilities use fossil fuels, pollution is generated, carrying a societal cost since pollution affects everybody.

The societal cost of greenhouse emissions is based on how much carbon they create when burned. Therefore, those people who cause great pollution must pay for it. Carbon tax encourages individuals, businesses and utilities in increasing energy efficiency and lessening energy consumption through making dirty fuels, such as coal and oil, more expensive. Also, carbon tax creates clean and renewable energy from sources like solar and wind to become more cost-competitive than fossil fuels.

Carbon tax is one of the two market-based strategies; the other one is called cap-and-trade. Such strategies are aimed at slowing global warming and decreasing greenhouse gas emissions. The CO2 that are formed through burning fuels are trapped in the atmosphere in which heat is absorbed and a greenhouse effect is created. This greenhouse effect will lead to global warming that causes significant climate changes.