How does a carbon tax work?

By taxing emissions, it incentivizes businesses to update their operations so they reduce their contribution to global warming.

A carbon tax requires 3 key elements:

Pricing – governments must set a price on greenhouse gas emissions.

Monitoring – we need a reliable way to measure the amount of emissions released by companies.

Enforcement – taxes, fines, and other methods for enforcing the carbon tax must be put in place to keep companies honest.

Some countries have already implemented carbon taxes.

Center for Climate and Energy Solutions

What is a carbon tax?

A carbon tax is a fee associated with carbon emissions. This is most often in the form of a business burning fossil fuels. A business can burn fossil fuels directly (via their delivery fleet) or indirectly (the electricity that powers their store front originates from a coal fired power plant).

Carbon taxes are an economic way of incentivizing our transition away from fossil fuels.

Currently businesses who emit global warming gasses shoulder no cost for their actions. This and other externalities go unaddressed in the existing free market, which means there is no incentive for businesses to reduce their emissions.

By placing a tax on emissions, we will have an economic model that is more representative of the actual market.