Carbon Tax

A carbon tax is tax levied on the greenhouse gas emissions (GHG) generated
from burning fuels. It puts a price on each ton of GHG emitted. A carbon tax
is a fee intended to make users of fossil fuels pay for climate damage their
fuel use imposes by releasing carbon dioxide into the atmosphere, and also
to motivate switches to cleaner energy. It has the advantage of providing an
incentive without favoring any one way of reducing emissions over another.
By reducing fuel consumption, increasing fuel efficiency, using cleaner fuels
and adopting new technology, businesses and individuals can reduce the
amount they pay in carbon tax, or even offset it altogether.

List of Pros of Carbon Tax

1. Environment Conservation
The core purpose of carbon tax is to ensure that organizations or
countries that emit huge amounts of carbon dioxide, cut down if not
eliminate their emissions. This will help in minimizing pollution and the
effects of global warming in the process. Imposing carbon tax would
help in reducing environmental and economic damage from climate
change by lowering carbon dioxide emissions. Since the onset of
Industrial revolution more than two centuries ago, people have
released increasing quantities of greenhouse gases into the
atmosphere.
When all countries if the world, companies and organizations takes part
in this noble cause, whatever damage the environment is experiencing
at the moment can be reduced and pave the way for possible healing.
2. Alternative Resources
As carbon taxes will increase in business overheads, companies will be
encouraged to find a more efficient way of manufacturing products or
delivering services, because the alternative would help in their cost
reduction. For example -Think of cars powered by electricity or hydrogen
fuels. What is even better is that this will result in more ingenious and
environment friendly ideas in various industries, from agriculture to logistics.
By the time the post-oil economy arrives, transition would be easier and
faster for everyone concerned. Electricity will be generated from alternative
resources, which is less polluting and more-eco-friendly in comparison with
nuclear and fossil fuels. This may also encourage people to walk or cycle to
work, and promote a healthy lifestyle at the same time.

3. Revenue Increase
Carbon tax can help increase revenue significantly. Revenue generated from

carbon tax can be used by government in numerous ways. It can be used to

reduce budget deficits, decrease existing marginal tax rates, or can be used
to compensate people who would bear a disproportionate share of the cost of
carbon tax.
The same revenue can be used to repair existing damage caused by natural
disaster and pollution. It can be used to produce green electricity that will
solve energy need, that will be less damaging to the environment.
4. Social Effect
People and companies will be more socially aware of the significance of
reducing carbon dioxide emissions when they will pay the social cost of
excess CO2 of it through carbon tax. For instance- Electrical power plant may
use green alternative resources to produce energy, and people would be less
dependent on fuel or oil.
Disadvantages of Carbon Tax
1. Production Shift
There is possibility that organizations might move their production units or
their business to places where there is lower or no carbon taxes. This is
known as pollution havens. This could impact the economy of country. Due
to relocation of businesses, a lot of workers would lose their jobs.
2. Expensive Administration Costs
For carbon tax to be implemented properly, the government would require a
lot of money to ensure carbon tax is functioning properly. Aside from this, it
is often difficult to determine amount of tax that must be impose and actual
external cost.
3. Covert Operations
Companies may use some covert strategies or dirty tricks to fool the system
and to evade carbon taxes. They may carry their operation secretly and
produce carbon in a way that could be more damaging.
4. Costs Increase
Cost of fossil fuels may rise, which will increase the cost of fuels
It is believed that carbon tax will increase the cost of fossil fuels, which will
then increase expenditures involved in goods and services production. In a
poor developing world, this can spell bad news because they cant afford the
slightest increase in energy costs. Low-income earners are likely to suffer
when their energy bills are raised. This would then call for a carbon tax rule
that will reflect each person or companys ability to pay.

With the ongoing debate of whether or not global warming is catastrophic,

questions about the benefits of carbon tax remain. Perhaps the answer of pro
or anti carbon tax would depend on who you are asking. Companies that will
be greatly affected by it will always look at tax as a bane, while
environmentalists will view it as a boon.