Definition Definition

Carbon Tax

Carbon Tax is a type of environmental tax imposed on products that require the release of carbon-based particles into the air during their production and hence, contribute to greenhouse gas pollution (including oil, gas, coal, and other fossil fuels). 

The level of the tax should depend on the carbon (polluting) content of each material that is emitted into the biosphere and the tax amount could be rethought as it is falling short to take effect on the decisions made by the big companies.

Companies that emit carbon dioxide and other greenhouse gases into the environment for industrial production purposes are obligated to pay the carbon tax based on the amount of carbon emission.  

Governments impose a carbon tax like other environmental taxes to discourage carbon emission so that the country’s carbon footprint reduces. Trying to cut down on the carbon tax, companies would like to opt for environmentally friendly alternatives. 


For example, the USA has set a $60 tax per metric ton of carbon dioxide or other harmful gases emitted in the year 2021. By the year 2030, the carbon tax is set to increase up to $93.

The amount of carbon taxes is not very effective for the multimillion-dollar companies dealing in billions and hence, the disregard for reducing the harmful gas emission when the profit grows incessantly. 


Use of the Term in Sentences:

  • Carbon taxes sadly see a very negligible amount of desired outcomes in general. 
  • The hike in the price of the produced goods and services should be proportional to the increase in carbon taxes.


Category: Economics
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