Carbon Tax: Meaning, Objectives, How does it work, Results

Carbon tax is a tax levied on the the fuels and related contents which emit carbon dioxide in to the environment. For example Petrol, Diesel, LPG, Coal etc.


Carbon Tax

Carbon Tax: Day by day with the increasing emission of gases having carbon content in to the environment is causing to pollution extremely. Eventually this would result in a factor decreasing the standard of living of the, mankind. Despite having alternative source of energy people are using coal, petrol, gas, diesel kind of fuels which releases the huge amount of carbon into the environment.

In order to curb this governments of many countries have been continuously implementing different policies and programs. Carbon tax is one of those ways implemented by government.

What is Carbon Tax?

Carbon tax is a tax levied on the the fuels and related contents which emit carbon dioxide in to the environment. For example Petrol, Diesel, LPG, Coal etc., this will bring a demotivated behavior in the people using the carbon causing sources of energy.


The main objective of this tax is to reduce the content of the carbon in the environment. Thus controlling the pollution of the environment, especially air pollution.


Content in this Article

Increasing content of the carbon in the environment has become a threat to mankind by depleting the ozone layer of the earth. The excessive carbon dioxide will also lead to acid rains which is very dangerous to the living beings on this earth. So it is very important duty of the mankind to implement the steps to reduce the carbon emissions around the world. Carbon tax is mainly intended to bring down the carbon releasing sources so that the possibility of the above said problems will not emerge.

Must read –Accounting for Credit Available in Respect of MAT

How does it work?

Generally carbon tax rate is fixed based on the volume of the carbon dioxide emitted by burning the fuel. But it is very difficult to measure this among various enterprises using different sources of energy as they might be using different mix of sources as per their convenience.

So, some government in the world impose this tax on the basis of the volume of the fuel consumed.

In India:

Currently in India there is no carbon tax. But there are some taxes and duties which are imposed for the same purpose as carbon tax. Coal cess can be said as a form of carbon tax in India. The rate of coal cess was very low in the initial times. But year by year government has increased it up to Rs 200/tonne in the recent 2015-16 budget.

In his budget speech of union budget 2015-16 Mr Jaitely said that “Basic excise duty rates on petrol and diesel are also being increased suitably so as to subsume education cess and secondary and higher education cess presently levied on them”. This is also a form of carbon tax as termed by the finance minister.

Carbon Tax Pros and Cons


  • Carbon tax will demotivate the people from using carbon emitting fuels and encourage them to go for alternative energy such as solar, hydro and wind energy.
  • The amount of tax revenue will be an additional source of revenue to pocket of the government
  • Enterprises will think of investing in the projects of alternative power generation such as solar, wind etc.,
  • On the Other side there are some limitations that may cause due to the imposition of carbon tax as:

Products like coal, crude oil will be priced high due to the increase tax rate which may result in higher coat of electricity. Eventually this would result in inflation.

Must read –Regulation and taxation of e commerce transactions

Despite of its negative results carbon tax will in long run results in reduced carbon dioxide emission into the environment. This will improve the health standards of the people.


I'm currently working as an intern.I'm passionate about entrepreneurship and technology. Feel free to ask your queries by reaching me at or my Facebook profile.

Related Post

Latest Comments

  1. This is amazing! You attempt to manipulate behavior by taxation. You do not provide an adequate solution to the nation’s mass transit shortcomings. Do you really trust the Government to return the tax back to it’s citizens? Wake up.


Join the Discussion