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Carbon Tax: Option or Necessity?

Global Warming is one of the biggest issues we face today. Our climate conditions deteriorate every day as climate patterns change and global temperatures continue to rise. In a climate report published by the National Oceanic and Atmospheric Administration, 2021 saw a 0.90ºC rise in global temperatures. As opposed to 2019 & 2020, which saw a rise of 0.94⁰C, we were better off this year, but it is not much of an improvement.

We need steps to reduce the emission of greenhouse gases like Carbon Dioxide and Methane, implemented on individuals as well as industries. 

One possible method is to promote the usage of low emission fuels like biomass or renewable sources of energy like solar or hydro. However, there was no reason for large corporations to spend more on these alternative fuels since they could spend considerably lower on fossil fuels. Therefore, it is not important to promote or encourage such corporations, it is necessary to enforce the usage of alternative energy sources. This purpose can be achieved by implementing a Carbon Tax.

What is a Carbon Tax? 

The carbon tax is a tax levied on carbon-emitting activities required to produce goods or services. The tax is levied on carbon emitted by industries per tonne. The implication is that this would drive the prices higher, thereby forcing companies to look into better and non-polluting sources of energy. The carbon content was drastically increased in the carbon cycle after industries adopted the use of fossil fuels, but it is believed to significantly reduce the carbon content in the carbon cycle.

Sweden was among the first countries to adopt this tax, as early as the 1990s. In 1991, Sweden’s energy tax system underwent a change as the Carbon tax was introduced and other general energy taxes were reduced by 50%. Sweden was able to adopt Biomass and hydroelectricity as some of the major sources of energy by 2000. 

The most important result of the introduction of this tax was the development of new methods of Biomass extraction and the expansion of its Biomass market. World economists are developing other kinds of schemes similar to it that could help in reducing carbon emissions. One of the most famous plans is the Emission Trading Scheme (ETS) developed by the European Union.

However, it poses several challenges, especially financially. Certain developing countries are against the proposed regulations of Carbon Tax. The biggest issue regarding it is the utilization of accumulated tax funds. Some believe such funds must be invested into development projects of renewable energy, whereas some feel that the money ought to be returned to families in the form of tax reduction or rebate. 

In 2015, the CEO of Tesla, Elon Musk, suggested in a climate change discussion to “make it a revenue-neutral Carbon Tax”. This would imply that there would be a reduction in other taxes and only those who engage in high levels of carbon emission activities would pay an increased tax. 

Large companies are purely profit-oriented. They will not adopt a business practice that drives down their profits. We do not need to provide such companies with encouragement, we need to force them to comply. 

We must legalize such practices to ensure that the world we pass down to the next generation is in a better condition. Lack of any legal pressure is stopping countries like India from enacting climate change plans like Carbon Tax or the ETS. Therefore, a Carbon tax is not an option anymore, it is a necessity.

Thanks for reading!

by Aman Agarwal

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