Carbon tax
Definition. A carbon tax is a tax levied on the carbon content or greenhouse gas emissions of fuels and activities, designed to internalise the negative externality of pollution. By raising the private cost of emitting towards the true social cost, it discourages emissions and encourages cleaner production.
It is a market based instrument that lets firms choose how to cut emissions. Singapore applies a carbon tax to large emitters as part of its sustainable growth strategy.
This term belongs to Inclusive and Sustainable Growth in Singapore in A Level Economics. Read the full chapter for the diagrams, worked examples and exam technique.
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