Every hydrocarbon fuel like coal, petroleum and natural gas contains carbon in it. And when this fuel is burnt considerable amount of carbon dioxide (CO2) is released into atmosphere. Now CO2 is one of the major green house gases which have the most negative impact on the global climate. According to the scientists human induced green house gases are the preliminary cause of the increasing global warming of the earth and carbon dioxide is the most important anthropogenic GHG. Worldwide human activity produces 27 tons of carbon dioxide every year. Now carbon tax is a form of pollution tax. This tax is charged so that the users of fossil fuel pay for what damage they are doing to the climate by emitting carbon dioxide to the atmosphere. Not only that, this concept will force them to shift to cleaner and non-conventional energy resources consequently.
From the economic perspective, carbon tax can be grouped as a Pigovian tax (this is a form on tax which is levied on any market oriented activity which has negative external effect on the environment).Carbon tax is also a regressive tax as the regressive impact of this tax can be marked by using the revenues in the favor of the low-income group people.
Why we need a Carbon Tax and Why It won’t be Enough
Why we need to levy carbon tax:
This is the simple truth that global warming has already made devastating problems in our life and if we do not stop the way we are handling our nature we will face more dark days in the coming days. So what we can do is that we can make reduction in the burning of the fossil fuels. And carbon tax can come handy in that mission. Carbon tax will put a monetary value on the real negative value the GHGs are doing to the community, our planet and our environment in one hand and in other way the community, the industries will shift to the greener and cleaner technologies and they will invest in green solutions. For example, if higher price is set for as carbon tax then more investment in solar or wind power energy will be automatically encouraged. And as the carbon tax will make the conventional activity more expensive, it will make the greener options far more affordable.
The countries who have implemented carbon tax:
Finland is the first country to enact a carbon tax in 1990.The direct taxation system is applied in many countries like Sweden, the Netherlands and Norway. Several states in North America have enacted this taxation policy. Sweden enacted this in 1991.Australia started to levy tax in 2012 and it was repealed in 2014. Most of the countries are yet to implement this taxation system in their economy.
Why carbon tax is not enough:
Though many countries have implemented carbon tax but they have not worked promisingly. There is a system called ‘cap-and-trade system’ which sets limits on carbon usage and allow the companies to buy and sell subsidy. This system worked in case of trace pollutants like nitrogen and sulfur but as the carbon problem is vast and the companies throughout the world are using ruthless opportunities to spoil the system, the result is not very hopeful. The companies are even using political powers to win the exemptions. So the result is very disappointing and the carbon taxation system only covers 12 percent of the total world’s emission. So if we don’t understand the importance of the problem and do not cooperate with the systems the coming future will surely going to show us some devastating consequences.