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Carbon Tax at a Glance

Carbon Tax

Carbon taxes are imposed on fuels which contain carbons. The fuels which have the carbon tax levied include fossil fuels such as petroleum, natural gas and coal. These fuels release carbon dioxide into the environment and pose a hazard to the environment.

The carbon tax is meant to encourage competition amongst those that create fuels. Fuels which releases high amounts of carbon dioxide, have a higher carbon tax levied than those that do not release as large of an amount.

Carbon credits are generated to encourage companies to focus research and manpower on finding more environmentally friendly sources of energy, such as windmills, which leave no carbon foot print. Carbon credits are permits which allow a company to emit one tonne of carbon. As these permits are traded, companies are encouraged to come up with ideas to protect the environment through the financial incentive.

Solar energy and wind energy are two types of environmentally friendly energy which are rewarded with incentives. In addition to being able to avoid the carbon tax, companies that use renewable energy sources may receive tax breaks or incentives. These incentives can also apply to power produced from water and nuclear energy.

There are a variety of taxes which are applied to energy sources and other items, which can have a negative impact on the environment. These taxes are applied in an effort to reduce pollution and encourage companies to reduce pollution.

NEXT: Commercial Tax at a Glance

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