CARBON TAX ON PETROL PRODUCT

A research paper submitted in partial fulfillment of the course

ECONOKMICS -1 for the requirements of the Degree B.A. LL.B.(Hons.) for
the Academic Session 2019-2020

Submitted By: YOGANAND

Roll Number: 1986

Submitted To: Dr. SHIVANI MOHAN

Assistant Professor

September, 2019

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 Chanakya National Law University Nyaya Nagar, Mithapur, Patna-800001

DECLARATION BY CANDIDATE

I hereby declare that the work reported in the BA, LL.B (Hons.) Project Report entitled
“CARBON TAX ON PETROL PRODUCT” submitted at Chanakya National Law University is
an authentic record of my work carried out under the supervision of DR. SHIVANI MOHAN. I
have not submitted this work elsewhere for any other degree or diploma. I am fully responsible
for the contents of my Project Report.

SIGNATURE OF CANDIDATE

NAME OF CANDIDATE: YOGANAND

ROLL NO. - 1986

CHANAKYA NATIONAL LAW UNIVERSITY, PATNA

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 TABLE OF CONTENT

DECLARATION BY CANDIDATE..............................................................................................2

ACKNOWLEDGEMENT...............................................................................................................4

AIMS AND OBJECTIVE...............................................................................................................5

HYPOTHESIS.................................................................................................................................5

RESEARCH METHODOLOGY....................................................................................................5

INTRODUCTION...........................................................................................................................6

WHY CARBON TAX ON PETROL PRODUCT?.........................................................................8

IMPORTANCE OF CARBON TAX ON PETROLEUM PRODUCTS.........................................9

ADVANTAGES AND DISADVANTAGES OF CARBON TAX ON PETROLEUM

PRODUCT.....................................................................................................................................10

CARBON PRICING......................................................................................................................14

AMMENDMENT IN CARBON TAX IN 2015 BUDGET..........................................................16

EFFECT OF CHANGE IN CLIMATE DUE TO CARBON TAX ON PTEROLEUM

PRODUCT.....................................................................................................................................18

CONCLUSION..............................................................................................................................20

BIBLIOGRAPHY..........................................................................................................................21

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.

ACKNOWLEDGEMENT
The researcher takes this opportunity to express his profound gratitude and deep regards to
DR.SHIVANI MOHAN for her expert guidance, monitoring and constant encouragement
throughout the course of this project. The blessings, helps and guidance given by her time to time
shall carry the researcher along with the journey of life on which the researcher is about to
embark. The researcher is obliged to staff members of CHANAKYA NATIONAL LAW
UNIVERSITY for the valuable information provided by them in their respective fields. The
researcher is grateful for their co-operation during the period of his assignment.

Lastly, I owe the present accomplishment of my project to my friends, who helped me

immensely with materials throughout the project and without whom I couldn’t have completed it
in the present way. I would also like to extend my sincere gratitude to my parents and all those
unseen hands that helped me at every stage of my project.

NAME: YOGANAND

COURSE: B A.LL.B. (Hons.)

ROLL NO: 1986

SEMESTER: 3rd

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 AIMS AND OBJECTIVE
1. Researcher aims to study of effect of carbon tax on petrol product on climate and
environment.

2. Researcher also aims to study the economic effect of the carbon tax on petrol product

HYPOTHESIS
1. The researcher has believe that Carbon taxes offer a potentially cost-effective means of
reducing greenhouse gas emissions.

2. The researcher has believe that Carbon tax is a form of pollution tax.

RESEARCH METHODOLOGY
For the project research, researcher will rely upon doctrinal method of research.

SOURCES OF DATA

The researcher will be relying on secondary sources to complete the project.

SECONDARY SOURCES

- Books, Websites etc.

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 LIMITATIONS

The researcher has time and territorial limitations in completing the project.

INTRODUCTION
The carbon tax is a tax imposed on the carbon content of fuels and, like coal trading, is a form of
setting carbon emission prices. The concept of the carbon tax is also used to refer to the
equivalent carbon tax, which is quite similar, but can be used for any type of greenhouse gas or
combination of greenhouse gas emissions by any economic sector1.

By 2018, at least 27 countries and entities at sub-national level have introduced carbon taxes.
Studies show that carbon taxes are effective in reducing greenhouse gas emissions. Economists
often say that carbon taxes are the most effective and effective way to stop climate change, with
the least negative impact on the economy.

When a hydrocarbon fuel such as coal, oil or natural gas is burned, its carbon is converted to
carbon dioxide (CO2) and other carbon compounds. CO2 is a heat retaining greenhouse gas that
causes global warming that damages the environment and human health. As greenhouse gas
emissions from fossil fuel combustion are closely related to the carbon content of their fuels, this
negative external effect can be offset by taxing the carbon content of fossil fuels at any stage of
the production cycle.2

Taxes on carbon dioxide emissions are potentially convenient ways to reduce greenhouse gas
emissions and to tackle the problem of greenhouse gases. To avoid the abolition of the tax on
carbon dioxide revenues, you can spend on low-income groups.

A carbon tax is paid by businesses and industries that produce carbon dioxide through their
operations. The tax is designed to reduce the output of greenhouse gases and carbon dioxide, a

1
www.igmchicago.org http://www.igmchicago.org/surveys/carbon-taxes-ii. accessed on 16-09-19.
2
"Carbon Taxes: What Can We Learn From International Experience?"

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colorless and odorless incombustible gas, into the atmosphere. The tax is imposed with the goal
of environmental protection. Carbon chemistry is potent but also simple. The amount of CO2
released in burning any fossil fuel is strictly proportional to the fuel’s carbon content. This
allows the carbon tax to be levied “upstream” on the fuel itself when it is extracted from the
ground or imported into the U.S., which vastly simplifies its administration. Carbon taxes are one
of a broad range of policy instruments designed to reduce GHG emissions. When considering
whether they are the right instrument for pursuing GHG mitigation or other goals, it is helpful for
jurisdictions to compare them to the other instruments that can be used for meeting the same
goals, and consider their respective strengths, weaknesses, and implications. It is equally
important to consider how carbon taxes relate to other climate policies, as well as to other taxes,
in order to create smart climate policy and fiscal policy mixes, respectively. This chapter
introduces carbon taxes and guides policy makers in understanding how they work and how they
compare with other policy instruments designed to reduce GHG emissions and achieve related
development object. Coal tax is a form of pollution tax. Pollution taxes are often grouped with
two other economic policy instruments: tradable permits / credits for pollution and subsidies.
These three environmental economic policy instruments are based on the provisions on
command and control. The difference is that the classic rules on the penalty of command
determine, based on the results or prescriptive norms, what every polluter is required to do to
comply with the law. Regulation of command and control is not considered an economic
instrument because it is usually enforced by narrower measures such as a detention or control
order, although it may include an administrative fine in specific location regulations . The
instrumental distinction between tax and the command and control regulation is determined by
the adopted legislative names,and whether they contain 'tax' as a defined term in the Act

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 WHY CARBON TAX ON PETROL PRODUCT?
The need is dire: the levels of CO2 already in the Earth’s atmosphere and being added daily are
destabilizing established climate patterns and damaging the ecosystems on which all living
beings depend. Very large and rapid reductions in the United States’ and other nations’ carbon
emissions are essential to avoid runaway climate destabilization and minimize severe weather
events, inundation of coastal cities, spread of diseases, loss of forests, failure of agriculture and
water supply, infrastructure destruction, forced migrations, political upheavals and international
conflict3.

Earth’s climate is warming, and changing, at a terrifying pace.

A robust tax on carbon pollution will create powerful incentives inducing policy-makers and
individuals to reduce carbon emissions through conservation, substitution and innovation.

Currently, the prices of electricity, gasoline and other fuels reflect little or none of the long-term
costs from climate change or even the near-term health costs of burning fossil fuels. This
immense “market failure” suppresses incentives to develop and deploy carbon-reducing
measures such as energy efficiency (e.g., high-mileage cars and high-efficiency air conditioners),
renewable energy (e.g., wind turbines, solar panels), low-carbon fuels (e.g., biofuels from high-
cellulose plants), and conservation-based behavior such as bicycling, recycling and overall
mindfulness toward energy consumption4.

Taxing fuels according to their carbon content will infuse these incentives at every link in the
chain of decision and action — from individuals’ choices and uses of vehicles, appliances, and
3
https://www.carbontax.org/whats-a-carbon-tax/ accessed on 16-09-19.
4
Havranek, T., Irsova, Z., Janda, K, and D. Zilberman (2014). Selective Reporting and the Social Cost of Carbon.
UC Berkeley CUDARE working paper 1139.

8|Page
housing, to businesses’ choices of new product design, capital investment and facilities location,
and governments’ choices in regulatory policy, land use and taxation.

A carbon tax won’t stop global climate disruption by itself — other, synergistic actions are
required as well. But without a carbon tax, even the most aggressive regulatory regime (e.g.,
high-mileage cars) and “enlightened” subsidies (e.g., tax credits for efficiency and renewables)
will fall woefully short of the necessary reductions in carbon burning and emissions. 

IMPORTANCE OF CARBON TAX ON PETROLEUM PRODUCTS

The public's recognition of global warming has driven lawmakers around the world to negotiate
greenhouse-gas reductions. You'll probably hear a few legislators suggest a tax on carbon -- or
sometimes more broadly, a tax on the emissions of fossil fuels. But before the word "tax" sets off
alarm bells, consider the effect of combusted fossil fuels on the environment. They cause
ground-level ozone, acid rain, global climate change and a myriad of other problems. Carbon tax
is one of two major market-based options to lower emissions, the other being cap-and-trade
schemes. While cap-and-trade seems to have won over most politicians, many economists and
consumers prefer carbon tax for its simplicity and impartiality.

To implement a carbon tax, the government must determine the external cost for each ton of
greenhouse gas emission. This is difficult because scientists and economists must first agree on
which assumptions to use5.

Carbon tax is a form of pollution tax. It levies a fee on the production, distribution or use of
fossil fuels based on how much carbon their combustion emits. The government sets a price per
ton on carbon, then translates it into a tax on electricity, natural gas or oil. Because the tax makes
using dirty fuels more expensive, it encourages utilities, businesses and individuals to reduce
consumption and increase energy efficiency. Carbon tax also makes alternative energy more
cost-competitive with cheaper, polluting fuels like coal, natural gas and oil6.

Carbon tax is based on the economic principle of negative externalities. Externalities are costs or
benefits generated by the production of goods and services. Negative externalities are costs that
5
Smith, S. (June 11, 2008). "Environmentally Related Taxes and Tradable Permit Systems in Practice". OECD,
Environment Directorate, Centre for Tax Policy and Administration.
6
https://www.taxpolicycenter.org accessed on 16-09-19

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are not paid for. When utilities, businesses or homeowners consume fossil fuels, they create
pollution that has a societal cost; everyone suffers from the effects of pollution. Proponents of a
carbon tax believe that the price of fossil fuels should account for these societal costs. More
simply put -- if you're polluting to everyone else's detriment, you should have to pay for it.

ADVANTAGES AND DISADVANTAGES OF CARBON TAX ON

PETROLEUM PRODUCT

ADVANTAGES-:

It is widely believed that the release of carbon dioxide is the main contributor to social and
environmental problems, particularly global warming. This type of pollution is deemed as a
negative externality, which is a cost imposed on the entire society and not just the certain
individuals who are using or consuming polluting products, such as cars. And because certain
carbon-intensive industries are creating negative externalities, the social cost of production
should be greater than that of the private entities7.

Now, the carbon tax is employed to internalize such an externality, which means that the final
price of goods should include the external and not just the private cost. Similar to the “Polluter
Pays Principle”, it was incorporated into international law at the 1992 Rio Summit, stating that
those who cause environmental costs should be made responsible to pay the full social cost of
their actions. Theoretically speaking, this tax should be equal to the external cost. At this output,
the marginal social cost should be equal to the marginal social benefit, making the demand to fall
and the new equilibrium to be socially efficient.

With all the positive intentions that this type of tax carries, its idea still has garnered some
criticisms, leading to some heated debates around the world. To come up with a good opinion
about this subject matter on our end, it is best to look at its pros and cons.

List of Advantages of Carbon Tax

7
"ECONOMISTS' STATEMENT ON CARBON DIVIDENDS". www.clcouncil.org. 2019. accessed on 16-09-19.

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1. It encourages people to find alternative resources.

With the carbon tax causing increases in business overheads, companies will be prompted to find
more efficient ways to manufacture their products or deliver their services, as it would be
beneficial to their bottom line. What’s more, this can even result in more environment-friendly
and ingenious ideas across various industries, from logistics to agriculture. This would be very
helpful by the time the post-oil economy arrives, as it would make transition a lot faster and
easier for those who are involved. Instead of relying heavily on fossil fuels and nuclear power,
electricity would be generated from alternative sources, which are more eco-friendly and less
polluting. Aside from these, the tax would also encourage people to cycle or walk to work,
promoting a healthy lifestyle8.

2. It helps with environmental conservation.

The main objective of the conception of the carbon tax is to make sure those organizations and
companies that emit large amounts of carbon dioxide CO2 will reduce, if not eliminate, their
emissions, which minimizes pollution and the impact of global warming. When everyone would
take part in this noble cause, the damage had by the environment at this moment can be
addressed, paving the way for possible recovery. As a result, the environment is expected to last
longer, and we would still have our planet to live in for the thousands of years.

3. It promotes socially efficient income.

Take note that that both businesses and individuals will be paying the social cost of excess
carbon dioxide through the carbon tax, which entails that they would be more socially aware of
what emissions could mean to businesses and the world. This would prompt them to switch to
means of gaining income that are socially efficient.

4. It helps increase revenue.

According to a 2011 report by the Congressional Budget Office, “A $20 per ton carbon tax
would raise nearly $1.2 trillion over the next decade.” This means that there would be plenty of
opportunities to produce green energy to address the need for sustainable and less damaging
power sources, and that a growing green movement that would be beneficial to society would be
8
"ECONOMISTS' STATEMENT ON CARBON DIVIDENDS". www.clcouncil.org. 2019. accessed on 16-09-19.

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promoted. The same revenue can be spent on repairing any damage caused by natural disasters
and pollution.

DISADVANTAGES-:

1. It imposes expensive administration costs9.

The carbon tax can be really expensive, considering that the government would need a
substantial amount of money for its implementation. What’s worse, if sufficient funds were not
available at their disposal, implementation of such a rule would be ineffective, as basically it
requires money to ensure it would function properly. Plus, it is stated to be often difficult to
determine the actual external cost and the tax amount that must be imposed, which requires more
time, effort and money as well.

2. It causes a shift in production.

It is highly possible that business establishments will move their operations to a region that has
lower or no carbon tax—a place that is also known as “pollution haven”—which will have an
impact on the economy, especially when trade-offs would fail to aid the economy in general.
Also, this would mean that a significant number of workers would lose their jobs, causing
unemployment rates to shoot to the roof. So, carbon tax would not exactly stop carbon dioxide
production, but would only change where and how it is produced.

3. It carries the risk of cost increases.

Many critics believe that this type of tax will increase the fossil fuel costs, which will
consequently increase expenditures that are involved in the production of goods and delivery of
services. For developing countries, this can spell bad news as it would be difficult for them to
afford the slightest increase in energy costs, not to mention that low earners would suffer from

9
See Supra Note- 6

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increases in energy bills. This will most likely call for a carbon tax rule that reflects each
company or individual’s ability to pay.

4. It promotes covert operations.

The carbon brings about the odds of companies looking for ways to evade it, such as covert
strategies and dirty tricks to fool the system. What’s worse, these establishments would be
secretive about their entire operations, producing carbon dioxide in a way that could cause more
environmental damage. It is very important to keep in mind that unethical production of carbon
dioxide and tax evasion is a very deadly combination.

With the ongoing debates of whether global warming is catastrophic or not, questions about what
benefits the carbon tax will bring also remain. Companies and organizations that will be greatly
affected by it would always look at it as a bane, while environmentalists would certainly view it
as a very good thing.

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.

CARBON PRICING
The phrase put a price on carbon has now become well known with momentum growing among
countries and business to put a price on carbon pollution as a means of bringing down emissions
and drive investment into cleaner options.

So what does it mean to put a price on carbon, and why do many government and business
leaders support it?

There are several paths governments can take to price carbon, all leading to the same result. They
begin to capture what are known as the external costs of carbon emissions – costs that the public
pays for in other ways, such as damage to crops and health care costs from heat waves and
droughts or to property from flooding and sea level rise – and tie them to their sources through a
price on carbon10.

A price on carbon helps shift the burden for the damage back to those who are responsible for it,
and who can reduce it. Instead of dictating who should reduce emissions where and how, a
carbon price gives an economic signal and polluters decide for themselves whether to
discontinue their polluting activity, reduce emissions, or continue polluting and pay for it. In this
way, the overall environmental goal is achieved in the most flexible and least-cost way to
society. The carbon price also stimulates clean technology and market innovation, fuelling new,
low-carbon drivers of economic growth.

There are two main types of carbon pricing: emissions trading systems (ETS) and carbon taxes.

An ETS – sometimes referred to as a cap-and-trade system – caps the total level of greenhouse
gas emissions and allows those industries with low emissions to sell their extra allowances to
larger emitters. By creating supply and demand for emissions allowances, an ETS establishes a
market price for greenhouse gas emissions. The cap helps ensure that the required emission

10
https://carbonpricingdashboard.worldbank.org accessed on 16-09-19.

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reductions will take place to keep the emitters (in aggregate) within their pre-allocated carbon
budget.

A carbon tax directly sets a price on carbon by defining a tax rate on greenhouse gas emissions
or – more commonly – on the carbon content of fossil fuels. It is different from an ETS in that
the emission reduction outcome of a carbon tax is not pre-defined but the carbon price is.

The choice of the instrument will depend on national and economic circumstances. There are
also more indirect ways of more accurately pricing carbon, such as through fuel taxes, the
removal of fossil fuel subsidies, and regulations that may incorporate a “social cost of carbon.”
Greenhouse gas emissions can also be priced through payments for emission reductions. Private
entities or sovereigns can purchase emission reductions to compensate for their own emissions
(so-called offsets) or to support mitigation activities through results-based finance.

Some 40 countries and more than 20 cities, states and provinces already use carbon pricing
mechanisms, with more planning to implement them in the future.  Together the carbon pricing
schemes now in place cover about half their emissions, which translates to about 13 percent of
annual global greenhouse gas emissions.

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 AMMENDMENT IN CARBON TAX IN 2015 BUDGET
Budget 2015, presented by Finance Minister Arun Jaitley, has a first. In it, India has accepted
that it has a de-facto carbon tax—on petroleum products and dirty coal. Arguably, the only big
green initiative of this budget is the increase of tax on coal—from Rs 100 per tonne to Rs 200
per tonne. But the question is: is this carbon tax, imposed on the carbon content of fuel, doing
what it should—reduce greenhouse gas emissions that are responsible for climate change? In
other words, is there a design behind the carbon tax to ensure we move beyond polluting fossil
fuels?

The budget follows from the Economic Survey, which states that high price on diesel and petrol
are important price signals to limit consumption and, hence, CO2 emissions. In 2014, taking
advantage of the global fall in fuel prices, subsidy or under-recovery has gone and the
government has increased excise duty on both petrol and diesel. So even though fuel is cheaper,
the tax component is higher. The Economic Survey estimates that based on emission factors,
currently, India imposes an implicit carbon tax of US $140 per tone of CO 2 on petrol and US $64
on diesel. This is substantial11.

The Economic Survey also estimates that the tax of Rs 100 per tone of coal is equivalent to a
carbon tax of US $1 per tone of CO 2. It argues that this tax should be increased so that it can lead
to CO2 reduction and also better reflect the health cost of emissions from coal-fired power plants.
It calculates that a three-fold increase from the current rate would lead to an annual CO2 emission
reduction of 129 million tones—this is equal to seven per cent of India’s current emissions. A
five-fold increase in the tax would equalize price of domestic coal with international and would
contribute to annual CO2 emission reduction of 214 million tones, which is 11 per cent of India’s
annual emissions.

In budget 201512, the finance minister has opted to take the slow road and has doubled the tax on
coal to balance the need to tax pollution and the price of power in his words. He also mentions

11
www.indiaenvironmentportal.org.in accessed on 16-08-19.
12
https://www.ideasforindia.in accessed on 16-08-19.

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that India’s de-facto carbon tax on most petroleum products compares with international norms.
But is this tax an adequate signal to bring about change?

Let’s take petrol and diesel. The fact is that the government has increased the tax on fuel because
it is convenient. It will be important to maintain this “carbon tax”, even when the price of petrol
and diesel increases in the international market. But it is also a fact that the price of these fuels is
lower today and as far as the consumer is concerned, the signal to change consumption is weak
and inadequate.

Therefore, not only does the government require to tax these polluting fuels, it also requires to
use the tax funds and much more to provide infrastructure to wean us away from cars or using
roads to transport goods. What is bad is budget 2015 is doing the reverse. It says it will set aside
Rs 4 per litre of the excise duty on petrol and diesel for a dedicated road cess. This tunnel vision
of viewing infrastructure for transport as just “roads” is regressive. Instead, what is needed is to
reinvent mobility so that it moves goods and people, and not vehicles. The fact is that budget
2015 has recognised that this excise duty is a carbon tax, which is putting a price on each tonne
of CO213 emitted. Now this tax must be used to help shift to less carbon-intensive ways of
production.

We also know that the health costs of air pollution are very high. Budget 2015 does little to
address this concern. It does not say that the excise duty collected on dirty fuel will be used to
upgrade refinery technology so that we can get clean fuel and breathe easy. It is also a fact that
even though the government is no longer subsidising diesel, its price remains lower than that of
petrol, mainly because of differential levels of taxation. So, even though there has been a decline
in the number of diesel private cars being sold, it is not enough to make a dent in pollution
levels. Therefore, what is needed is to tax diesel vehicles to equalise the price differential. This
is also the case with coal cess. The government now aims to use this cess to clean the Ganga or
build toilets. All this is important but takes us away from the objective of moving away from
using polluting fuels or cleaning emissions from thermal power.

13
See Supra Note-12

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 EFFECT OF CHANGE IN CLIMATE DUE TO CARBON TAX ON
PTEROLEUM PRODUCT
Putting a price on carbon, in the form of a fee or tax on the use of fossil fuels, coupled with
returning the generated revenue to the public in one form or another, can be an effective way to
curb emissions of greenhouse gases. That’s one of the conclusions of an extensive analysis of
several versions of such proposals, carried out by researchers at MIT and the National
Renewable Energy Laboratory.

What’s more, depending on the exact mechanism chosen, such a tax can also be fair and not hurt
low-income households, the researchers report.

The analysis was part of a multigroup effort to apply sophisticated modeling tools to assess the
impacts of various proposed carbon-pricing schemes. Eleven research teams at different
institutions carried out the research using a common set of starting assumptions and policies.
While significant details differed, all the studies agreed that carbon taxes can be effective and, if
properly designed, need not be regressive.

An overview report on the 11 studies appears today in the journal Climate Change

Economics, along with reports on the individual team results. The MIT and NREL team included
former MIT postdoc Justin Caron, MIT Joint Program on the Science and Policy of Global
Change Co-Director John Reilly, and Stuart Cohen and Maxwell Brown of NREL.

Reilly, who is a senior lecturer at MIT’s Sloan School of Management, says the groups looked at
several options for a carbon tax and use of the resulting revenue. They considered two different
starting values ($25 and $50 per ton of carbon emissions produced), and two different rates of
increase (1 percent or 5 percent per year), as well as three different approaches to dispensing the
revenue: an equal rebate to every household, a tax break for individuals, or a corporate tax break.

Of the different levels of fees, the team found, not surprisingly, that the highest starting value
and the highest rate of increase produced the greatest emissions reductions. But the study showed

18 | P a g e
that even the lowest taxation rates could in themselves lead to reductions sufficient to meet the
U.S. near-term commitmtent under the 2015 Paris Agreement on climate change, Reilly says.

However, the most efficient way of achieving those reductions, in terms of overall impact on the
economy, is to use the revenue to reduce taxes on capital — corporate profits or investment
income. Given the relatively high capital taxes in the U.S. (at the time this study was completed)
such cuts spur economic growth more than cuts in other taxes or direct rebates to households.
However, that option is also the most regressive, with its impact disproportionally falling on
lower-income households.

At the other extreme, the option of sending equal payments to everyone was found to be the least
efficient for the overall economy, but also the least regressive. Individual tax breaks came in
somewhere in between on both criteria.

But the researchers say another scenario, combining the basic strategy of providing tax breaks to
corporations but adding a rebate to the low-income families most affected by the tax, could
virtually eliminate the regressive aspects of the tax at very little cost in overall efficiency, and
thus might be the most appealing option. It could have appeal both for conservatives concerned
about the costs of such a program, and for liberals concerned about its possible impacts on those
at the lower end of the economic spectrum.

“It’s sort of an obvious solution, Reilly says,to take some chunk of the money and use it to focus
on the poorest households, and use the rest to cut taxes. It doesn’t seem like a hard thing.” He
continued: “It is important to realize that this study was completed before the tax reform that
took effect in January that slashed corporate income tax rates. Given that these tax rates have
now been cut, and that those cuts will contribute to a growing deficit, we might better consider
the revenue as a contribution to closing the deficit.”

Reilly’s team used an economic model developed at MIT to assess the impacts of different
policies on the world’s likely climate trajectory, and combined that with a model of the nation’s
electrical system, developed at NREL. This combination allowed the team to do a much more
detailed assessment of the way different policies would affect decisions by the power producers

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and distributors — a key point, since the electricity sector has the most immediate potential for
changes that could reduce emissions, and is the biggest contributor to emissions overall.

CONCLUSION
The main objective of the conception of the carbon tax is to make sure those organizations and
companies that emit large amounts of carbon dioxide CO2 will reduce, if not eliminate, their
emissions, which minimizes pollution and the impact of global warming. When everyone would
take part in this noble cause, the damage had by the environment at this moment can be
addressed, paving the way for possible recovery. As a result, the environment is expected to last
longer, and we would still have our planet to live in for the thousands of years.

Taxing fuels according to their carbon content will infuse these incentives at every link in the
chain of decision and action — from individuals’ choices and uses of vehicles, appliances, and
housing, to businesses’ choices of new product design, capital investment and facilities location,
and governments’ choices in regulatory policy, land use and taxation.

Let’s take petrol and diesel. The fact is that the government has increased the tax on fuel
because it is convenient. It will be important to maintain this “carbon tax”, even when the price
of petrol and diesel increases in the international market. But it is also a fact that the price of
these fuels is lower today and as far as the consumer is concerned, the signal to change
consumption is weak and inadequate.

With all the positive intentions that this type of tax carries, its idea still has garnered some
criticisms, leading to some heated debates around the world. To come up with a good opinion
about this subject matter on our end, it is best to look at its pros and cons. We also know that the
health costs of air pollution are very high. Budget 2015 does little to address this concern. It does
not say that the excise duty collected on dirty fuel will be used to upgrade refinery technology so
that we can get clean fuel and breathe easy. It is also a fact that even though the government is
no longer subsidising diesel, its price remains lower than that of petrol, mainly because of
differential levels of taxation. So, even though there has been a decline in the number of diesel
private cars being sold, it is not enough to make a dent in pollution levels. Therefore, what is

20 | P a g e
needed is to tax diesel vehicles to equalise the price differential. This is also the case with coal
cess. The government now aims to use this cess to clean the Ganga or build toilets. All this is
important but takes us away from the objective of moving away from using polluting fuels or
cleaning emissions from thermal power.

BIBLIOGRAPHY

Books,Website, Online Journal & Other Authorities :

"Carbon Taxes: What Can We Learn From International Experience?".........................................6

"ECONOMISTS' STATEMENT ON CARBON DIVIDENDS". www.clcouncil.org. 2019.
accessed on 16-09-19...........................................................................................................10, 11
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