Carbon Tax

A carbon tax is an environmental policy instrument that imposes a levy on fuels based on their carbon content, which aims to encourage individuals, businesses, and industries to shift towards low-carbon or renewable energy sources and reduce their overall energy consumption. By assigning a monetary value to carbon emissions, this market-based approach internalizes the negative externalities associated with greenhouse gas emissions, such as climate change and air pollution. The tax is designed to provide a financial incentive for the adoption of cleaner technologies, energy efficiency measures, and conservation practices. Revenues generated from carbon taxes can be used by governments for various purposes, such as funding climate mitigation initiatives, investing in green infrastructure, or redistributing the revenues through tax cuts or rebates to offset any regressive impacts on low-income households. By promoting the transition to a sustainable, low-carbon economy, carbon taxes aim to contribute to global efforts to combat climate change and its associated environmental and social consequences.