By definition, a carbon tax is a type of tax that needs to be summarized about how much carbon a company or corporation releases. The aim of why these taxes exist is simply because they can significantly decrease the carbon dioxide in the atmosphere and with that, greenhouse gasses are also decreased in the atmosphere. The speed that these taxes have over the reduction of carbon dioxide and the level they reach according to the research that has been done, has shown them as the most cost-effective and quality-worthy.
These taxes are not like the taxes we all know and pay. Carbon taxes are paid for two main reasons - to pay for intentionally polluting the environment, and to reinvest with reforestation or financially. You are paying for the pollution that your business, of any kind of branch, does.
Therefore, there are two forms of pollution taxes or different type of economic policy tools. One of them is tradable pollution, while the second is credits and the other one is subsiding.
Now, how carbon dioxide is produced, and what forms of chemical reactions make carbon dioxide to be released into the atmosphere? When fuels of hydrocarbons, for example, coal, petroleum, and natural gases are burnt in many different processes of production across various industries, the hydrocarbon converts to another form, known as carbon dioxide. This gas is harmful because it ignites greenhouse gases which through rain or just by being in the air, can cause serious health and environmental issues.
Fossil fuels have in their consistency incorporated carbon, so when they are burned or are under thermal transformation, they release a certain amount of gas, carbon dioxide in the air. The amount released in the air is proportional to the amount they have in their natural consistency. This has numerous negative side effects and therefore, it is much needed for something to be done, to compensate for the harm that was made. This is where carbon taxes play their role. Carbon taxes are calculated according to the content of carbon that is released from fossil fuels. Different fossil fuels have different carbon taxes, as they include carbon in different amounts and quantities.
To some companies, it might be easy to buy carbon offsets, but to others, whose factories use fossil fuels that include high taxes, it might not be the best solution to buy large amounts of carbon offsets to pay off the taxes. Moreover, this step won’t solve the problem as money, if not invested wisely, can’t decrease the amount of carbon in the air.
Here are some of the most important things to know if you plan on planting trees instead of paying the required tax: