Carbon tax

A carbon tax is a tax levied on the carbon content of fuels. It is a form of carbon pricing. Carbon is present in every hydrocarbon fuel (coal, petroleum, and natural gas) and converted to carbon dioxide (CO
2) and other products when combusted. In contrast, non-combustion energy sources—wind, sunlight, geothermal, hydropower, and nuclear—do not convert hydrocarbons to CO
2. CO
2 is a heat-trapping "greenhouse" gas which represents a negative externality on the climate system (see scientific opinion on global warming). Since GHG emissions caused by the combustion of fossil fuels are closely related to the carbon content of the respective fuels, a tax on these emissions can be levied by taxing the carbon content of fossil fuels at any point in the product cycle of the fuel.

Carbon tax offers social and economic benefits. It is a tax that increases revenue without significantly altering the economy while simultaneously promoting objectives of climate change policy. The objective of a carbon tax is to reduce the harmful and unfavorable levels of carbon dioxide emissions, thereby decelerating climate change and its negative effects on the environment and human health.

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