Carbon Tax

A CARBON TAX is a market-based instrument (MBI) designed to reduce the severity of climate change. It does so by discouraging the use of energy sources that emit carbon dioxide (CO2) by making their use more expensive, through economic rather than government regulation. A carbon tax increases the price of CO2–emitting energy sources, making investments in cleaner, alternative energy generation a more competitive and financially attractive way of generating power.

Many countries around the world have introduced a carbon tax, including Denmark, Switzerland, Sweden, Norway, Holland, Finland, Austria, Italy, and Germany. The German government introduced a carbon tax in 1999 as part of a wider ecological policy initiative that aimed to reduce CO2 emissions, encourage investment in energy-efficient technology, and provide an economic boost to the ...