The carbon tax is aimed at levying a charge on any individual, group or entity that is contributing to global warming and environmental degradation by releasing carbon dioxide and other greenhouse gases into the atmosphere. From oil companies to manufacturers, everyone having a significant contribution to the increase of greenhouse gases and also pollution are subjected to carbon tax. Today, carbon tax is an international law. The carbon tax has its proponents and critics. There are indeed some merits and demerits. Let us explore the carbon tax pros and cons.
List of Pros of Carbon Tax
1. Good for the Environment
Carbon tax makes companies more responsible. If you give a company or an individual a free hand and don’t put any financial burden or accountability then the individual or company will go all guns blazing, damaging the environment in the process. By imposing a tax, you are making a company and indeed the world at large accountable for their actions. This can reduce the carbon footprint.
2. Focus on Renewable Energy
Carbon tax has compelled companies to think of renewable energy and to focus more on how renewable resources that are eco friendly can be used as a replacement to traditional fuels. Solar power, wind, geothermal energy and many other forms of renewable sources have been explored but since nonrenewable energy is easily accessible and cost effective, companies have not bothered to take a plunge into nonrenewable sources. The carbon tax aims to change that approach.
3. A Richer State Exchequer
Carbon tax augurs well for the state or federal exchequer. The money raised from the tax can be used to attend to problems of those citizens who have been affected by environmental degradation. The funds can also be used for environment conservation projects.
4. Responsible Use of Nonrenewable Energy
Can there be a cap on how much energy industry can use? No, but the company can always have a more energy efficient approach. Carbon tax facilitates that switch.
List of Cons of Carbon Tax
1. Low Industrial Output
As companies become more cautious of how much energy they are using or what their carbon footprint is, they may reduce their industrial output. This can affect the local and the national economy. Jobs may be affected. There can be short and long term effects on the financial health of the company and the industries affected by the carbon tax.
2. Lower Profits
Companies would not only pay carbon tax but would also need to pay for the administrative costs, keeping a tab on the carbon footprint and overall legal processes to stay on the right side of the law. These can hit the profits of the company.
3. Breaking the Law
It is rather novel to expect every company adhering to the carbon tax. There are companies that find covert ways to hoodwink the authorities.