Pros And Cons Of Carbon Tax

There are pros and cons over implementing carbon tax in some countries since this policy have benefits and drawbacks. According to Baranzini et al. (2000, cited in Lin and Li, 2011), one of the benefits is that carbon tax encourages the polluters (firms and households that contribute the production of carbon dioxide) to substitute the use of fuel products which results in changes of the structure of energy production and consumption. Moreover, it generates energy efficiency; higher tax will drive the polluters to reduce their consumption of fossil fuels and therefore creates energy saving. In addition to the positive impacts of carbon tax implementation, it promotes the development of renewable energy. The carbon tax revenue can be allocated to subsidize the environmental protection projects or the technological development to promote energy saving and emission reduction. However, as Lin and Li (2011) point out, one of the drawbacks of this policy is that the tax enforcement increases the price of related products. For example, industries use machines in production, and the machines are driven by fuels. As a …show more content…
However, public should consider the benefits of the carbon tax implementation as well. For example, Finland has implemented carbon tax policy and the result indicates significant and negative impact on the growth of its per capita CO2 emissions (Lin and Li, 2011). If governments from all countries work together to force stricter environmental policy, there will be not carbon leakage and the tax can be levied to reduce the emissions. Besides, if the revenue is allocated properly, this will drive the success of environmental protection projects or the technological development to promote energy saving and emission reduction. Consequently, the sustainability of future generations is keep