What is Carbon Tax and Which Countries Have One?

The link between the environment and the financial world is often closely examined.  This has been particularly true in recent years as increasing numbers of initiatives have been put into place whereby finances can be raised in order to then be used to fund green projects.

Carbon tax is one of these initiatives and levers that has been used.  Essentially, carbon tax is a form of carbon pricing.

In this respect, the purpose of carbon tax is twofold.

  • First, it is hoped that carbon tax will drive up the price of fuels to such an extent that people will stop buying it and therefore harming the environment.
  • Second, the funds raised from the carbon tax can then be used in environmental initiatives.

Both of these reasons contribute to the controversy surrounding carbon tax.  Anyone living in the United Kingdom will testify that the continuing rise of fuel prices has done very little to put people off driving, while there is widespread cynicism around to what extent the funds raised are actually put into improving the environment.

That said, it is important to note that few people, both in the UK and in other countries, actually realise that the high prices they are paying are related to a carbon tax.

Supporters of carbon tax initiatives claim that it is much more efficient from a money raising perspective than attempting to regulate carbon emissions directly, which would be difficult to police given the vast number of variables and the numbers of people using fuels.  It would be practically impossible, for example, to place a limit on each individual’s personal carbon emissions.

Which Countries Have a Carbon Tax?

Many countries have a carbon tax, although it is notable that none of the oil producing countries in the Middle East have one in place.  In Africa, only South Africa has a carbon tax, but this is still only on new vehicles, which has been the case since implementation in September 2010.

South Africa is, however, pursuing a long-term plan in order to try to make itself fully environmentally sustainable.

In recent years, various countries across Asia have gradually implemented a carbon tax, although in some areas there has not been full implementation and carbon taxation proposals are still being developed in some, including across parts of China.

In Oceania, Australia’s carbon tax was introduced in 2012.

Implementation of carbon tax in Europe has been widespread, partly because this has been driven by the European Union.  At the same time, many countries have introduced their own energy taxes, although these have been at varying levels as opposition at various levels has prevented there from being a blanket carbon tax at a fixed rate.  Many European countries, such as the UK and the Netherlands, have had carbon and energy taxes in place since the early 1990s.

In North America, carbon tax is perhaps surprisingly not widespread.  In both Canada and the United States, there are no nationwide or federal levels of carbon tax, but there has been some implementation at state level by the authorities in some locations.

It is unknown to what extent carbon taxes have been implemented in Central and South America, but it is likely there are few, if any, countries that have done so.