Understanding the concept of Carbon Tax

Understanding the concept of Carbon Tax

Concept and benefit of Carbon Tax

Understanding the concept of Carbon Tax


Increasing temperatures threaten the existence of all the species on this planet. Higher temperatures are worsening the conditions on this planet by causing disasters like storms, heat waves, floods and droughts. The dry places are becoming drier, and the wet are becoming wetter. If not stopped, this has the potential to collapse the whole ecosystem. A carbon tax is a great way to curb emissions. 


Just like we pay tax for goods and services, an amount is charged for the emission of greenhouse gases. It is known as a carbon tax. The governing authority decides a specific price that an entity or an individual has to pay for each ton of greenhouse gas they emit. The main intention behind introducing a carbon tax is to charge the industries for polluting the environment. 


The charges levied on carbon emissions inspire the organizations and individuals involved to search for energy-efficient options. To avoid increasing costs, consumers will opt for alternative energy sources. It is a kind of pollution tax charged as compensation for the pollution generated. It is imposed on entities and companies that burn carbon-based fuels, including coal, oil, and natural gas. 


why is it needed? 

CO2 emissions per capita of income have been continuously increasing in India. Power, Building, Transport and other industries play a major role in these emissions. The carbon dioxide is causing extreme heat and a rise in global temperature. This further causes climate change and also contributes to respiratory diseases from air pollution. Wildlife fires, food supply disruptions, loss of species, and increased drought are some of the harms caused by climate change. 


Carbon tax increases the cost of all those emitting greenhouse gases by reminding them to opt for green options. Further, the tax collected is used for environmental protection purposes. At present, India does not have any specific price under the name of the carbon tax. 


carbon tax in India

There is no specific carbon tax in India, but a clean energy cess was introduced in 2010 by the Indian Government. The cess was imposed on coal, lignite and peat to promote clear environmental initiatives. The monetary resources generated from this cess were further used for financing and resourcing clean energy initiatives. 


At the time of introduction, the clean energy cess was Rs. 50/tonne which increased to Rs. 100/tonne in 2014. Then in 2015, it was Rs.200/tonne, and currently, it is Rs. 400/tonne. The cess is payable on the quantity removed during the month.


benefits of having a carbon tax

  • The cost of the emission of greenhouse gases is directly paid by the polluters. 

  • This collected amount is further utilized in mitigating any damage caused by climate change. 

  • The act of taxing shows the disagreement of the government on the excessive usage of fossil fuels. This will motivate industries to look for a source of renewable energy, and put them to use. 

  • New innovative startups in renewable energy will grow and increase the scope of employment for many talented individuals.  

  • It will eventually reduce pollution as industries opt for more options in the area of renewable energy. 

  • A shift to renewable energy in the Healthcare industry can lead to better facilities at an affordable cost. As the power supply for medical equipment and infrastructure goes down, the overall cost of healthcare will also reduce. 


Along with having its benefits, there is also a concern that comes along with carbon tax. Levying carbon tax on industries will directly impact the price of final products. With increased costs due to carbon tax, the manufacturers will raise the price per product. This will directly impact the purchasing power of poor people. This may be a reason why the government is going slow with the carbon tax. 


India has not yet applied a carbon tax but is collecting compensation through cess and taxing high for fossil fuels. At the same time, it is also incentivizing the use of renewable energy and showing support towards it. Imposing a carbon tax can be one of the best options to promote green energy and reduce emissions.


Carbon tax, even if levied, will fail to show its impact if consumers don’t change their consumption patterns and lifestyle. Opting for eco-friendly transport options, reducing plastic usage and reusing in every possible way also play a significant role in reducing carbon emissions. 


As a consumer, let’s act on what we can!

Author-Brinda Shah is a freelance content writer. she is a ca turned into a writer who loves to read, write & meditate. you can connect with her on linkedin  and on instagram

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