What is Carbon Tax? And how it can Curb Pollution and Transform India!

Greater Noida (02/01/19) : To put it simply, Carbon Tax is meant as a penalty for anyone who pollutes the environment by contributing to emissions of higher amount of CO₂ along with other pollutants in it. In its basic form, the Tax sounds regressive and as a tool meant to control the progress of the nation.

However, if the same tax is used to penalise big corporations for polluting the environment while providing the poor people with green energy solutions, then the inbuilt regressive nature of the tax is no longer a threat.

Such is the solution proposed by Shouvik Chakraborty (University of Massachusetts Amherst) and Rohit Azad (Centre for economic studies and planning JNU).

According to both Researchers, The new “Robin-hood’ form of the old Carbon tax can produce jobs, reduce pollution and decrease the income inequality all the same time. It sounds too good to be true but the immediate demand for a clean environment is the biggest motivator for such a tax to win.

Imagine a scenario in which, a rich corporation makes different kinds of products while emitting a certain amount of pollution. Such an organisation provides employment to the people and gives them daily wages, which improve their lives and thus they work harder to make the company grow even more.

Now imagine the same scenario but with one real-world factor in it, ‘pollution’. The company now pollutes the environment to such a point that the wages being given are no longer justified to the amount of damage being done to the health of its workers.

It is exactly where the new form of Carbon tax comes in. It is an avoidable tax, which incentives the company to reduce its carbon footprint. The tax also passes the ‘collected funds’ to the poor people in the form of green energy infrastructure, which further makes it easy to adopt solutions like electric vehicles, solar panels, etc.

To understand how it works, let us go back to the last situation we discussed. The company that was polluting the environment now faces a big Carbon tax. Thus it is forced to pay the money up front and is incentivised to cut down its emissions in the future. The money being collected is used for building the above mentioned Green infrastructure and in turn a lot of new jobs. While in the background the environment is also improving due to the lack of pollutants being released in the atmosphere.

No longer can we treat the Environment as a separate entity from the economy. It is an integral part of any world’s development and industries like food, travel, health and even education depend upon it. Both researchers also go into detail about how the implementation of such a tax will favour economic growth as well.

This article was inspired by an Interview conducted by Nagraj Adve, for The Wire.