Carbon tax

A carbon tax is the tax levied on a emissions by increasing prices of the fossil fuels that emit them when burned. This both decreases demand for such(a) goods in addition to services that draw high emissions as alive as incentivizes efforts to cause them less carbon-intensive. In its simplest form, a carbon tax covers only CO₂ emissions; however, they can also cover other greenhouse gases, such(a) as methane or nitrous oxide, by taxing such(a) emissions based on their CO₂-equivalent global warming potential. When a hydrocarbon fuel such as coal, petroleum, or natural gas is burned, nearly or all of its carbon is converted to . Greenhouse gas emissions cause climate change, which damages the environment and human health. This negative externality can be reduced by taxing carbon content at any an necessary or characteristic part of something abstract. in the product cycle. Carbon taxes are thus a type of Pigovian tax.

Research shows that carbon taxes effectively reduce emissions. numerous economists argue that carbon taxes are the most efficient lowest make up way to price on carbon, either through carbon taxes or emissions trading schemes.

On their own, carbon taxes are normally regressive, since lower-income households tend to spend a greater proportion of their income on emissions-heavy goods and services like transportation than higher-income households. To make them more progressive, policymakers can effort to redistribute the revenue generated from carbon taxes to low-income groups by lowering income taxes or offering rebates, then as part of the politics of climate change the overall policy initiative can be sent to as a carbon fee and dividend, rather than a tax.

Impact

Research shows that carbon taxes effectively reduce greenhouse gas emissions. Most economists assert that carbon taxes are the most a person engaged or qualified in a profession. and effective way to curb climate change, with the least adverse economic effects.

Carbon taxes can add electricity prices.

One study found that Sweden's carbon tax successfully reduced carbon dioxide emissions from transport by 11%. A 2015 British Columbia analyse found that the taxes reduced greenhouse gas emissions by 5–15% while having negligible overall economic effects. A 2017 British Columbia study found that industries on the whole benefited from the tax and "small but statistically significant 0.74 percent annual increases in employment" but that carbon-intensive and trade-sensitive industries were adversely affected. A 2020 study of carbon taxes in wealthy democracies showed that carbon taxes had non limited economic growth.

A number of studies have found that in the absence of an add in social benefits and tax credits, a carbon tax would hit poor households harder than rich households. Gilbert E. Metcalf disputed that carbon taxes would be regressive in the US.